Question

number 2

PW, AW An electric motor is rated at 10 horsepower (HP) and costs $800. Its full-load efficiency is specified to be 85%. A newly designed, high-efficiency motor of the same size has an efficiency of 90%, but costs $1,200. It is estimated that the motors will operate at a rated 10-HP output for 1,500 hours a year, and the cost of energy will be $0.07 per kilowatt-hour. Each motor is expected to have a 15-year life. At the end of 15 years, the first motor will have a salvage value of $50, and the second motor will have a salvage value of $100. Consider the MARR to be 8%. (Note: 1 HP = 0.7457kW.) (a) Determine which motor should be installed based on the PW criterion. (b) What if the motors operated 2,500 hours a year instead of 1,500 hours a year? Would the motor selected in (a) still be the choice? 2 You just purchased a pin-inserting machine to relieve some bottleneck prob- lems that have been created in manufacturing a PC board. The machine cost $56,000 and has an estimated service life of five years. At that time, the esti- maled salvage value would be $5,000. The machine is expected to operate 2,500 hours per year. The expected annual operating and maintenance cost would be $6,000. If your firm's interest rate is 15%, what would be the machine cost (own- ing and operating) per hour? E O Type here to search O e 6 a w SNwl 9 ? DO 18

Answer 1

(2)

Annual worth (PW) of costs ($) = 56,000 x A/P(15%, 5) + 6,000 - 5,000 x P/F(15%, 5) x A/P(15%, 5)

= 56,000 x 0.2983 + 6,000 - 5,000 x 0.4972 x 0.2983

= 16,705 + 6,000 - 742

= 21,963

Machine cost per hour = AW of costs / Number of hours per year = $21,963 / 2,500 = $8.79