Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 51

Perform a sensitivity analysis on the two parameters of M O costs and number of households to determine if alternative 3 remains the best economic choice. Three estimates are made for each parameter in Table 18-6. M O costs may vary up (pessimistic) or down (optimistic) from the most likely estimates presented in the case statement. The estimated number of households (4980) is determined to be the pessimistic estimate. Growth of 2% up to 5% (optimistic) will tend to lower the monthly cost per household. b) Consider the monthly cost per household for alternative 4, the optimistic estimate. The number of households is 5% above 4980, or 5230. What is the number of households that would have to be available in order for this option to have exactly the same monthly household cost as that for alternative 3 at the optimistic estimate of 5230 house holds