In a separate conversation, the line manager told you to not plan for a rebuild after 6000 hours because the pump will be replaced after a total of 10,000 hours of operation. The line manager wants to know what the base AOC in year 1 can be to make the ESL 6 years. He also told you to assume now that the 15% growth rate applies from year 1 forward. How does this base AOC value compare with the rebuild cost after 6000 hours?
> From the information shown for possible location of campgrounds and lodging at a national park, determine which project, if any, should be selected from the six mutually exclusive projects. Selected incremental B/C ratios are included. If the proper comp
> The city of Valley View, California, is considering various proposals regarding the disposal of used tires. All proposals involve shredding, but the benefits differ in each plan. An incremental B/C analysis was initiated, but the engineer conducting the
> The Department of Defense is considering three sites in the National Wildlife Preserve for extraction of rare metals. The cash flows associated with each site are summarized. The extraction period is limited to 5 years and the interest rate is 10% per ye
> A public-private partnership has been formed between a city, county, and construction/management company to attract a professional athletic team to the area. Assume you are the engineer with the company and are assisting with the benefit/cost analysis. T
> A public utility in a medium-size city is considering two cash rebate programs to achieve water conservation. Program 1, which is expected to cost an average of $60 per household, provides a rebate of 75% of the purchase and installation costs of an ultr
> If John’s father insists that he make 25% per year or more on the selected option over the next 10 years, what should he do? Use all the methods of economic analysis you have learned so far (PW, AW, ROR) so John’s father can understand the recommendation
> There are two potential locations to construct an urgent care walk-in clinic to serve rural residents. Use B/C analysis to determine which location, if any, is better at an interest rate of 8% per year.
> Two relatively inexpensive alternatives are available for reducing potential earthquake damage at a top secret government research site. The cash flow estimates for each alternative are given below. At an interest rate of 8% per year, use the B/C ratio m
> One of two alternatives will be selected to reduce flood damage in a rural community in central Arizona. The estimates associated with each alternative are available. Use B/C analysis at a discount rate of 8% per year over a 20-year study period to deter
> Dickinson, a large oil and gas drilling and operating corporation, has invested over the past 6 years in the installation and operation of a FOUNDATION Fieldbus H1 (FF H1) system developed by Pepperl+Fuchs of Germany. A project engineer has collected inf
> With an installed capacity in excess of 11,000 MW, the Belo Monte dam complex on the Xingu River in Brazil will be the world’s third largest hydroelectric dam. The project is expected to cost $16 billion and will begin producing electricity upon completi
> From the following data for a PPP project, calculate the (a) conventional, and (b) modified benefit/ cost ratios using an interest rate of 6% per year and an infinite project period.
> In most developed countries, laws that prohibit texting-while-driving (TWD) have been enacted. Hambara and Associates, a systems engineering consulting company, has won the contract to assist the Callaghan Police Department in implementing projects that
> A rate of return analysis was initiated for the infinite- life alternatives shown below. (a) Fill in the 10 blanks in the incremental rate of return (Δi*) columns. (b) How much revenue is associated with each alternative? (c) Which alternati
> Four different machines were under consideration for materials flow improvement on a drug bottling line. An engineer performed the economic analysis to select the best machine, but some of his calculations were removed from the report by a disgruntled em
> The four alternatives described below are being evaluated by the rate of return method. (a) If the proposals are independent, which should be selected at a MARR of 16% per year? (b) If the proposals are mutually exclusive, which one should be selected at
> Develop the actual cash flow series and incremental cash flow series (in $1000 units) for all five options in preparation for an incremental ROR analysis.
> A small manufacturing company could expand its operation by adding new products. Any or all of the products shown below can be added. If the company uses a MARR of 15% per year and a 5-year project period, which products, if any, should the company intro
> You are considering five projects, all of which can be considered to last indefinitely. If the company’s MARR is 15% per year, determine which should be selected if they are (a) independent projects, and (b) mutually exclusive alternati
> For the four revenue alternatives below, use the ROR method results to determine: (a) Which one(s) to select, if MARR = 17% per year and the proposals are independent. (b) Which one to select, if MARR = 14.5% per year and the alternatives are mutually ex
> Old Southwest Canning Co. has determined that any one of four machines can be used in its chili canning operation. The cost of the machines are estimated below, and all machines have a 5-year life. If the minimum attractive rate of return is 25% per year
> A company that makes clutch disks for race cars has the annual net cash flows shown for one department. Year…………………… NCF, $1000 0……………………………………. −65 1………………………………………. 30 2……………………………………… 84 3….…………………………………. −10 4…………………………………….. −12 (a) Determine the n
> A metal plating company is considering four different methods for recovering by-product heavy metals from a manufacturing site’s liquid waste. The investment costs and annual net incomes associated with each method have been estimated.
> For the nonconventional net cash flow shown, determine the external rate of return using the MIRR method at a borrowing rate of 10% per year and an investment rate of (a) 15% per year, and (b) 30% per year.
> A new advertising campaign by a company that manufactures products that apply biometric, surveillance, and satellite technologies resulted in the cash flows shown. Calculate unique external rate of return values using (a) the ROIC method with an investme
> Steel cable barriers in highway medians are a lowcost way to improve traffic safety without overstressing department of transportation budgets. Cable barriers cost $44,000 per mile, compared with $72,000 per mile for guardrail and $419,000 per mile for c
> Business and engineering seniors are comparing methods of financing their college education during their senior year. The business student has $30,000 in student loans that comes due at graduation. Interest is an effective 4% per year. The engineering se
> Use any method of economic analysis to display on the spreadsheet the value of the incremental ROR between server 2 with a life estimate of 5 years and a life estimate of 8 years.
> Tom, the owner of Burger Palace, determined that his weighted average cost of capital is 8%. He expects a return of 4% per year on all of his investments. A proposal presented by the owner of the Dairy Choice next door seems quite risky to Tom, but it is
> Five independent projects were ranked in decreasing order by two measures—rate of return (ROR) and present worth (PW)—to determine which should be funded with the total initial investment not to exceed $30 million. (a)
> A new cross-country, trans-mountain water pipeline needs to be built at an estimated first cost of $200,000,000. The consortium of cooperating companies has not fully decided the financial arrangements of this adventurous project. The WACC for similar pr
> For each of the following scenarios, state whether an incremental ROR analysis is required to select an alternative and state why or why not. Assume that alternative Y requires a larger initial investment than alternative X and that the MARR is 20% per y
> Jamison Specialties manufactures programmable incremental encoders that resist shock and vibration for use in harsh environments. Five years ago, the company invested $650,000 in an automated quality control system and recorded savings of$105,000 per yea
> Explain how the viewpoint established before a public sector analysis is started can turn an estimate from being categorized as a disbenefit to a cost, or vice versa.
> Identify the following funding sources as primarily public or private. (a) Municipal bonds (b) Retained earnings (c) Sales taxes (d) Automobile license fees (e) Bank loans ( f ) Savings accounts (g) An engineer’s IRA (Individual Retirement Account) (h) S
> Determine i* per year for the cash flows shown using factors and the IRR function.
> Use factors and a spreadsheet to determine the interest rate per period from the following equation: 0 = −40,000 + 8000(P∕A,i*,5) + 8000(P∕F,i*,8)
> If a manufacturer of electronic devices invests $650,000 in equipment for making compact piezoelectric accelerometers for general purpose vibration measurement, estimate the rate of return from revenue of $225,000 per year for 10 years and $70,000 in sal
> Use incremental ROR analysis to decide between the servers at MARR = 12%.
> A chemical engineer working for a large chemical products company was asked to make a recommendation about which of three mutually exclusive revenue alternatives should be selected for improving the marketability of personal care products used for condit
> When conducting an ROR analysis of mutually exclusive cost alternatives: (a) All of the projects must be compared against the do-nothing alternative (b) More than one project may be selected (c) An incremental investment analysis is necessary to identify
> A company that manufactures high-strength epoxys is considering investing $100,000 in two new adhesives identified as X and Z. The investment in X is $20,000 and is expected to yield a rate of return of 40% per year. Your supervisor asked you to determin
> The rate of return for alternative X is 18% per year and for alternative Y is 17%, with Y requiring a larger initial investment. If a company has a minimum attractive rate of return of 16%: (a) The company should select alternative X (b) The company shou
> Alternative A has a rate of return of 14% and alternative B has a rate of return of 17%. If the investment required in B is larger than that required for A, the rate of return on the increment of investment between A and B is: (a) Larger than 14% (b) Lar
> For the nonconventional net cash flow series shown, the external rate of return per year using the MIRR method, with an investment rate of 20% per year and a borrowing rate of 8% per year, is closest to: (a) 10.8% (b) 12.0% (c) 14.8% (d) 16.7%
> When applying the MIRR approach to determine the external rate of return of a project, which of the following statements is true? (a) The borrowing rate, ib, is usually equal to the MARR. (b) The borrowing rate, ib, is usually greater than the investment
> Five years ago, an alumnus of a university donated $50,000 to establish a permanent endowment for scholarships. The first scholarships were awarded 1 year after the contribution. If the amount awarded each year, that is, the interest on the endowment, is
> A bulk materials hauler purchased a used dump truck for $50,000 two years ago. The operating costs have been $5000 per month and revenues have averaged $7500 per month. The truck was just sold for $11,000. The rate of return is closest to: (a) 2.6% per m
> An investment of $60,000 ten years ago resulted in uniform income of $10,000 per year for the 10-yearperiod. The rate of return on the investment was closest to: (a) 10.6% per year (b) 14.2% per year (c) 16.4% per year (d) 18.6% per year
> Basset, a furniture manufacturing company, borrowed $1 million and repaid the loan through monthly payments of $20,000 for 2 years plus a single lump-sum payment of $1 million at the end of 2 years. The interest rate on the loan was closest to: (a) 0.5%
> For the net cash flow and cumulative cash flows shown, the value of x is nearest: (a) $−8,000 (b) $−16,000 (c) $16,000 (d) $41,000
> A $10,000 mortgage bond that is due in 20 years pays interest of $250 every 6 months. The bond coupon rate is: (a) 2.5% per year, payable quarterly (b) 5.0% per year, payable quarterly (c) 5% per year, payable semiannually (d) 10% per year, payable quart
> A $20,000 collateral bond has a coupon rate of 7% per year payable quarterly. The bond matures 30 years from now. At a market interest rate of 7% per year, compounded semiannually, the amount and frequency of the bond interest payments is: (a) $1400 per
> A municipal bond with a face value of $10,000 was issued today with an interest rate of 6% per year payable semiannually. The bond matures 20 years from now. If an investor paid $9,000 for the bond and holds it to maturity, all of the following equations
> As part of your inheritance, you received a bond that will pay interest of $700 every 6 months for 15 years. If the coupon rate is 7% per year, the face value of the bond is (a) $10,000 (b) $20,000 (c) $30,000 (d) $40,000
> When positive net cash flows are generated before the end of a project, and when these cash flows are reinvested at an interest rate that is greater than the internal rate of return, (a) The resulting rate of return is equal to the internal rate of retu
> According to Norstrom’s criterion, there is only one positive rate of return value in a cash flow series when: (a) The cumulative cash flow starts out positive and changes sign only once (b) The cumulative cash flow starts out negative and changes sign o
> According to Descartes’ rule of signs, the possible number of rate of return values for the net cash flow series ++++−−−−−−+−+−−−++ is (a) 2 (b) 4 (c) 6 (d) 8
> Five mutually exclusive cost alternatives that have infinite lives are under consideration for decreasing the fruit-bruising rates of a thin skin-fruit grading and packing operation (peaches, pears, apricots, etc.). The initial costs and cash flows of ea
> The plant superintendent told you, the safety engineer, that only one rebuild should be planned for, because these types of pumps usually have their minimum-cost life before the second rebuild. Determine a market value for this pump that will force the E
> Jewel-Osco evaluated three different pay-by-touch systems that identify a customer by a finger scan and automatically deduct the amount of the bill directly from their checking account. The revenue alternatives were ranked according to increasing initial
> If the alternatives are mutually exclusive and the MARR is 25% per year, the alternative to select is: (a) B (b) D (c) E (d) None of them
> If the alternatives are mutually exclusive and the MARR is 15% per year, the alternative to select is: (a) Either B, D, or E (b) Only B (c) Only D (d) Only E
> If the alternatives are independent and the MARR is 15% per year, the one(s) to select is (are): (a) Only D (b) Only D and E (c) Only B, D, and E (d) Only E
> Standby power for pumps at water distribution booster stations can be provided by either gasolineor diesel-powered engines. The estimates for the gasoline engines are as follows: ……………………………….Gasoline First cost, $....................... −150,000 M&O, $
> The incremental cash flow between two alternatives is shown below. The equation that can be used to correctly solve for the incremental rate of return is: (a) 0 = −20,000+3000(A∕P,Δi*,10)+400(P∕F,Δi*,10) (b) 0 = −20,000+3000(A∕P,Δi*,10)+400(A∕F,Δi*,10) (
> When comparing two mutually exclusive alternatives by the ROR method, if the rate of return on the alternative with the higher first cost is less than that of the lower first-cost alternative: (a) The rate of return on the increment between the two is gr
> When a B/C analysis is conducted, the benefits and costs: (a) Must be expressed in terms of their present worth values (b) Must be expressed in terms of their annual worth values (c) Must be expressed in terms of their future worth values (d) Can be expr
> When comparing different-life alternatives by the B/C method, the alternatives should be compared over: (a) The life of the shorter-lived alternative (b) The life of the longer-lived alternative (c) The LCM of their lives (d) An infinite time period
> If a company finances an expansion in its production facilities by issuing $6 million in preferred stock, using $3.5 million in retained earnings, and obtaining $15 million via a secured loan, it will have a D-E mix closest to: (a) 60 –40 (b) 50 –50 (c)
> Determine the economic service life of the pump. How does the ESL compare with the maximum allowed rebuilds?
> It is now 12 years after the products were developed, and the engineers invested most of their savings in an innovative idea. However, the question of “When do we sell?” is always present in these situations. To help with the analysis, determine the foll
> The top management team at your company is considering outsourcing the supply management function. Do you support this idea? Why, or why not?
> Consider the purchase of a new mobile phone. How would you determine the total cost of ownership? What are the costs that you might incur before the purchase, during the purchase, and after the purchase?
> Digital technologies are rapidly changing sourcing and supply management. What are the potential benefits and drawbacks to the adoption of digital technologies in supply management?
> In what situations should a company work with a poor performing supplier to improve its performance? Why?
> What are the costs and challenges involved with switching suppliers?
> Can you think of an organization that has benefited by extending social responsibility to its supply chain? What about one whose supply chain practices have hurt its reputation?
> One of the observations made in this chapter focuses on the relentless series of changes continuously being introduced by Amazon. How would these changes affect your firm and decision-making within the firm, as it pertains to the customer?
> The chapter offers one approach to customer management and relationship strategy based on sales volume and profitability. Can you think of other criteria that might be used to determine the most appropriate form of relationship?
> What aspects of operations management can contribute to customer success?
> Why don’t companies attempt to offer a commitment at the level of customer success with all of their customers?
> Why should metrics be regarded as primarily methods of communication? Think about the relationship between a metric, the strategy, and the task being carried out by an operations person.
> How can a company use the gap model of customer satisfaction to improve its operations management processes?
> Which market orientation would you consider for a standard product that has low, infrequent demand? What are the tradeoffs you would consider in making this decision?
> Consider products you consume. Identify purchases you have made from firms with the following market orientations:
> Consider some of your recent shopping experiences and discuss instances in which a store was out of stock of items you were planning to purchase. What did you do as a result of the stockout?
> You are a manager for a firm that sells computer and technological equipment through your stories and various on-line sites. You recently have found out that Amazon is releasing a new line of products (through its AmazonBasics line) that are in direct co
> In this chapter, we began with a discussion of Macy's and its omnichannel strategy. What are the possible implications of this strategy for the relationships between marketing and operations/supply chain management? The relationship between operations/su
> Explain the critical differences between basic customer service, customer satisfaction, and customer success.
> Under what conditions would you use a Kaizen Event?
> How would a restaurant use the 5-S program? How would an operating room using this program?
> What would happen if you tried to introduce a new strategy based on radical innovation into a facility where the organization has adopted wholeheartedly the lean culture?
> Most people have worked as “operations managers” at some time. Describe a job or experience that you had that involved the management of a process.
> Using the discussion of Lean Design, consider the design of a iPod competitor. Give examples of each of the following design wastes:
> Discuss how lean systems might apply to a fast-food hamburger stand. How will it have to be modified to deal with daily demand variation?
> You work in the marketing department of a firm that sells mountain bicycles and related gear. Its manufacturing division has decided to wholeheartedly adopt the lean systems philosophy. Will this affect your ability to delight your customers? Make a list
> Why is achievement of the following goals critical to the success of lean systems? Give an example of how each area contributes to the success of a lean system.
> Figure 8-4 illustrates the analogy of a boat hitting rocks as the level of water falls. Why is water a good analogy for inventory? Is the sequence in which rocks are encountered a good way to prioritize inventory reduction activities? How might this prio
> Imagine that your customer base is located in North America and your suppliers are located in China. Is it possible to implement lean supply chain management under such conditions? What are the challenges now facing the firm?
