1. St. Mary’s Cement Co. expects the operating
costs for running its Bowmanville plant will be $1,400,000 this
year. If the operating costs are expected to rise $100,000 annually
for the next 10 years, to the nearest 100 dollars, what is
Bowmanville’s equivalent annual operating cost, assuming a MARR of
12%?

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2. ACE’s shaker table costs $150,000. Its
operating and maintenance costs are $2,500 annually and it has a
salvage value of $30,000 after 10 years. At the end of years 4 and
8, it requires preventive maintenance at costs of $20,000 and
$10,000 respectively. At the end of year 5, it must be overhauled
at a cost of $35,000. Assuming a MARR of 10%, what annual value
should ACE put in its budget forecast to represent the annualized
cost of the shaker table (nearest dollar)?


3. Warren Tea needs new
tires for his Escalade. He researches the Internet and finds the
following alternatives:

                 
Warranty (mos)     Cost

TireA                   
12              
39.95

TireB                    24               59.95

TireC                  
36              
69.95

TireD                    48               90.00

Automotive engineer Warren figures that the warranty
period is a good estimate of the life of the tire. Using a MARR of
10% and annual cash flow, what is the AC of the cheapest option, to
the nearest cent?

4. Frique and Fraque have an Impala and Malibu
respectively. What is the annualized cost of the more expensive
car, to the nearest dollar, at a MARR of 5%?

Here are the financial details:

                                                
Impala              
Malibu

Price                                          $25,500             
$19,200

Annual
maintenance                  
  1,500                  1,000

Gas and oil (increasing
15%/yr)    1,200                  2,500

Salvage (8
yr)                             
10,000                  8,000

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