As groundwater wells age, they sometimes begin to pump sand (and they become known as “sanders”),

and this can cause damage to downstream desalting equipment. This situation can be dealt with by drilling a new well at a cost of $1,000,000 or by installing a tank and self-cleaning screen ahead of the desalting equipment. The tank and screen will cost $230,000 to install and $61,000 per year to operate and maintain. A new well will have a pump that is more efficient than the old one, and it will require almost no maintenance, so its operating cost will be only $18,000 per year. If the salvage values are estimated at 10% of the first cost, use a present worth relation to ( a ) calculate the incremental rate of return and ( b ) determine which alternative is better at a MARR of 6% per year over a 20-year study period.

 

Q311:

Konica Minolta plans to sell a copier that prints documents on both sides simultaneously, cutting in half the time it takes to complete big commercial jobs.

The costs associated with producing chemicallytreated vinyl rollers and fi ber-impregnated rubber rollers are shown below. Determine which of the two types should be selected by calculating the rate of return on the incremental investment.

Assume the company’s MARR is 21% per year.

(Solve by hand and/or spreadsheet, as instructed.)

	Treated	Impregnated
First cost, $	50,000	95,000
Annual cost, $ per year	100,000	85,000
Salvage value, $	5,000	11,000
Life, years	3	6