Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 24

Mid-Valley Industrial Extension Service, a state-sponsored agency, provides water quality sampling services to all business and industrial firms in a 10-county region. Just last month, the service purchased all necessary lab equipment for full in-house testing and analysis. Now an outsourcing agency has offered to take over this function on a per sample basis. Data and quotes for the two options have been collected. The MARR for government projects is 5% per year, and a study period of 8 years is chosen. The service director has asked the outsource company to reduce the per sample costs by 25% across the board over the 8-year study period. What will this do to the breakeven point ( Hint: Look carefully at your graph from Problem 13.46 before answering.)