Question

McLaughlin Services is on contract to Tuscany County, Florida. One of the McLaughlin engineers is evaluating alternatives that use a robotic, liquid propelled “pig” to periodically inspect the interior of buried potable water pipes for leakage, corrosion, weld strength, movement over time, and a variety of other parameters. Two equivalent robot instruments are available.

Robot Joeboy: P=- $85,000; annual M&O costs = -$30,000; S= $40,000

Robot Watcheye: P= - $97,000; annual M&O costs = -$27,000; S=$42,000

Select one using an AW comparison, MARR = 10% per year and a 3-year study period.

**Please show work using conversion factor notations and not using excel or other software. Thanks!**

Answer 1

Ans: Robot Joeboy should be selected.

Explanation:

Robot Joeboy:

P=- $85,000; annual M&O costs = -$30,000; S or F = $40,000

AW = -P ( A/P , i , n) - A + F ( A/F , i , n )

= -$85,000 ( A/ P , 10% , 3) - -$30,000 + $40,000 ( A/F , 10% , 3)

= -$85,000 ( 0.4021) - -$30,000 + $40,000 ( 0.3021)

= -$34178.5 - $30,000 + $12084

= -$64178.5 + $12084

= -$52094.5

Robot Watcheye:

P= - $97,000; annual M&O costs = -$27,000; S or F =$42,000

AW = -P ( A/P , i , n) - A + F ( A/F , i , n )

= -$97,000 ( A/ P , 10% , 3) - -$27,000 + $42,000 ( A/F , 10% , 3)

= -$97,000 ( 0.4021) - -$27,000 + $42,000 ( 0.3021)

= -$39003.7 - $27,000 + $12688.2

= -$66003.7 + $12688.2

= -$55315.5

The annual worth cost of Robot Joeboy is less than the Robot Watcheye . Therfore , Robot Joeboy should be selected.