Question: As the supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with
a. the PW method.
b. the IRR method.
c. the ERR method.
d. Would leasing crane A for nine years, assuming the same costs per year as for three years, be preferred over your present selection? (∈ = MARR = 15%).
