Question

Hi, could you solve problem 4.19 (chapter 4, problem 19) in the Basics of Engineering Economy 2nd Edition textbook. It's the first problem from that textbook I've come across that hasnt been done. Thank you very much.

The Briggs and Stratton commercial division designs and manufactures small engines for golf maintainence equipment. a robotics-based testing system will ensure their new guaranteed always start system works for every engine produced. Compare the two systems at MARR - 10% per year. solve using (a) tabulated factors and (b) single cell spreadsheet functions.

Please see systems graph

	Pull System	Push System
robot and support equipment first cost, $	-1,500,000	-2,250,000
annual M&0 cost,$ per year	-700,000	-600,000
Rebuild cost in year 3, $	0	-500,000
Salvage Value, $	100,000	50,000
Estimated life, years	8	8

Answer 1

(a) Let us use present worth method of comparision.

Pull System:

PW = 1,500,000 + 700,000(P/A, 10%, 8) + 0 - 100,000(P/F, 10%, 8)

      = 1,500,000 + 700,000(5.3349) + 0 - 100,000(0.4665)

      = 1,500,000 + 3,734,220 + 0 - 46,650

      = $5,187,570

Push System:

PW = 2,250,000 + 600,000(P/A, 10%, 8) + 500,000(P/F, 10%, 3) - 50,000(P/F, 10%, 8)

      = 2,250,000 + 600,000(5.3349) + 500,000(0.7513) - 50,000(0.4665)

      = 2,250,000 + 3,200,940 + 375,650 - 23,325

      = $5,803,265

Since it is a cost dominated project and since PW of pull system is less than push system, pull system should be selected.