GAB3112/GBB3173 - GROUP ASSIGNMENT 5 SEMMAY2011 REPLACEMENT ANALYSIS Instruction: Kindly submit the assignment to your respective lecturers by 11" August 2011. ol ‘An industrial lift truck has been in service for several years, and management is contemplating. replacing it. A. planning. horizon of six years is to be used in the replacement study. The old lift truck has a ‘current market value (MY) of $8,000. If the old truck is retained, itis anticipated to have annual operating and maintenance (O&M) costs of $9,000. The MY at the end of sixth year is nil, A new lift truck will cost $24,000 and will have O&M costs of $6,300. It will have a MV of $10,000 at the end of the planning horizon, Determine the preferred alternative; using PW comparison and a minimum attractive rate of retum of 18% per year. 03082011 9-2. A steam generation system at a biomass- fueled power plant uses electrostatic precipitator (ESP) to clean its. gascous effluents. ‘The power plant has consistently made use of the same type of ESP over the past several years. The installed cost of new ESP is $80,000. Records of the O&M ‘expenses per year are shown in Table 1, together with the market value of the ESP. ‘60,000 | 50,000 | 40,000 | 25,600 Determine the best time to replace the ESP ifthe MARR is 15% per year.GAB3112/GBB3173 ~ GROUP ASSIGNMENT 5, ‘SEMMAY2011 9.26, ‘A truck was purchased four years ago for $65,000. The truck can be sold at the present time for $40,000 and replaced by @ new truck with a purchase price of $70,000. Given the market values and the operation and maintenance costs as shown in Table 2, when should the defender be replaced (if at all) with the new truck if the MARR is 10% per year? TABLE 2: MV and O&M costs for Defender and Challenger DEFENDER ‘CHALLENGER EOV] MV | O&M [nov | MV [oa vosts costs 1] 30,000 |-s.s00 | 1 [36,000] §,500 2_| 20,006 | 10,500 | ~2 [44,000 6,400 3 | 13,000 | 14,000 | 3 _ [34,000 | 7,400 | 4000 716,000 | 4 [32,000 7 9,700 030820114} An individual Wwuck Was been in service Jor geveral\ years, cmd management is conlemplaing Ye placing iy A ploming Ponte gy cx years We te be used in the Yeplacement dtudy. Whe old \ift truck Colegemder) has a cayven} MV gy go F.000- the defender ¥ Yejamed , 4 is anlicipoted to have annua) operating And maintenance cooy a & FOO. W will have a zeve Ny ar the end oj ax additional yeare of service The new ly} lvuck Coallenger) will com ¥ 24,000 ond wil) have operobyg ond Mhaimlenance Cost od F 6/3800. H wit hove WV GY # 30,009 oF the end of planning hovizon. Determine the prasfered citernalive usmg PW and MARR Chedore ton) 's Wh ga Dedender Chatenger |etaee ry ol EE PEE eee tee eee o 1 eo 3 4 8 { Litt | | #5000 Fu,000 349s p ate aus e704 PW. + $000 - 000 (HAE, BWee ~ BHA - 6300 (TaAsY.,6)4 19000 8%, 2-430, yer = 4 42, 33849 to Dejendey is kep} vemained because it is lower cos} /