# Cost Analysis

## Cost Analysis

• Submitted By: yaralistayla
• Date Submitted: 04/22/2010 2:26 AM
• Category: Science
• Words: 2161
• Page: 9
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IE 347 ENGINEERING ANALYSIS AND COST ECONOMY
CASE I

1)
First of all we analyzed the problem by using AW analysis. We computed the AW for every year between 5 and 20 . We also computed these AW values for changing rate of return between 6% and 20%. Then we compared the results for every year and rate of return and tabulated the results in a matrix. We used the values of annual costs for energy, O&M and labor. We computed the overhaul cost by using (P/F,%i,n)*(A/P,%i,n) equation. We used only one overhaul cost for year 6 to 10, two for year 11 to 15 and three overhaul costs for 16 to 20.The matrix below shows comparisons between the projects.

Q1 |0.06 |0.07 |0.08 |0.09 |0.1 |0.11 |0.12 |0.13 |0.14 |0.15 |0.16 |0.17 |0.18 |0.19 |0.2 | |5 |A |A |A |A |A |A |A |A |A |A |A |A |A |A |A | |6 |A |A |A |A |A |A |A |A |A |A |A |A |A |A |A | |7 |A |A |A |A |A |A |A |A |A |A |A |A |A |A |A | |8 |B |A |A |A |A |A |A |A |A |A |A |A |A |A |A | |9 |B |B |B |A |A |A |A |A |A |A |A |A |A |A |A | |10 |B |B |B |A |A |A |A |A |A |A |A |A |A |A |A | |11 |B |B |B |B |B |A |A |A |A |A |A |A |A |A |A | |12 |B |B |B |B |B |B |A |A |A |A |A |A |A |A |A | |13 |B |B |B |B |B |B |B |A |A |A |A |A |A |A |A | |14 |B |B |B |B |B |B |B |B |A |A |A |A |A |A |A | |15 |C |B |B |B |B |B |B |B |A |A |A |A |A |A |A | |16 |C |B |B |B |B |B |B |B |A |A |A |A |A |A |A | |17 |C |B |B |B |B |B |B |B |B |A |A |A |A |A |A | |18 |C |C |B |B |B |B |B |B |B |A |A |A |A |A |A | |19 |C |C |B |B |B |B |B |B |B |A |A |A |A |A |A | |20 |C |C |C |B |B |B |B |B |B |A |A |A |A |A |A | |
We assume that ROR is more important because for bigger than 14% ROR there is only one recommendation which is Option A which has 6/15 probability. If we think from other perspective which is year the ability of changing the recommendation is lower. It can decide which option should be chosen without any effect of ROR with probability of 3/16.
The values of the matrix are given in the appendix 1.

2)...