2.) Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold a. Evaluate all alternatives using PW method and determine which alternative is preferable. b. Use incremental analysis to determine the best alternative. Capital Investment Annual Expense Annual Revenue A $28,000 $15,000 $23,000 $6,000 В $55,000 $13,000 $28,000 $8,000 C $85,000 $22,000 $42,000 Salvage Value $10,000 Useful life 10 10 10

2.) Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold a. Evaluate all alternatives using PW method and determine which alternative is preferable. b. Use incremental analysis to determine the best alternative. Capital Investment Annual Expense Annual Revenue A $28,000 $15,000 $23,000 $6,000 В $55,000 $13,000 $28,000 $8,000 C $85,000 $22,000 $42,000 Salvage Value $10,000 Useful life 10 10 10

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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1.b You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $125,000 per year; the investment cost is $400,000; and the first year estimated expense of $20,000 and will increase a rate of 5% per year. Assume an 8-year analysis period, no salvage value, and MARR = 15% per year. What is the ERR ( Ԑ=MARR) of this proposal? show whole solution, not in excel please
A major equipment purchase is being considered by Metro Atlanta. The initial cost is determined to be $1,000,000. It is estimated that this new equipment will save $100,000 the first year and increase gradually by $50,000 every year for the next 6 years. MARR=10% a. Using Benefit- Cost analysis, what is the Benefit/Cost ratio for this equipment purchase? b. Based on the Benefit/Cost analysis should Metro Atlanta purchase the equipment?
Consider these two alternatives.Alternative A Alternative BCapital investment OMR 6000 7500Annual revenues OMR 1800 2250Annual expenses OMR 500 750Estimated market valueOMR1200 1600Useful life 10 10MARR 12% 1. Recommend which alternative should be selected.2. How much capital investment of the expensive alternative have to vary so that theinitial decision would be reversed.
Alternative 3 is incorrect EUAC=( Equivalent Annaul COst of Initial Investment)+ (Expected Moderate annaual flood damage cost )+ (expected severe annaual flood cost )
1. The Present Worth Method A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $1,000 for each of the next 4 years, and then remain constant for the following 5 years; savings of $20,000 per year (EOY 1–10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm’s MARR is 10% per year, what is the present worth of the project? Is it a sound investment opportunity?
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P is using an 11% annual interest rate to decide if they should buy Truck A or Truck B. Which truck is more economical to buy, assuming that the two trucks serve similarfunctions and purposes? Use (a) Annual Cost Method (b) Present Worth Method, (c) Rateof Return on Additional Investment method. Formulas to be used: Rate of return on additional investment =(Savings of Benefits / Additional Capital) x 100% ROR≥ MARR (Choose the alternative with larger capital) ROR ≤ MARR (Choose the alternative with lesser capital investment)
1.) Clinix is considering four independent projects. Given: All the projects will be economically viable for only 10 years; Company’s MARR = 12% per year Find: Which project should be selected based on a present worth analysis. *Note* Financial values are in $1,000 units. Project A Project B Project C Project D First Cost ($) -2,700 -1,400 -10,000 -9,500 Annual Net Profit ($/year) 800 1,200 2,400 3,200 Salvage Value ($) 25 30 45 60
Engineering economy - ENGR 3322 The International Parcel Service has installed a new radio frequency identification system to help reduce the number of packages that are incorrectly delivered. The capital investment in the system is $65,000, and the projected annual savings are tabled below. The system’s market value at the EOY five is negligible, and the MARR is 18% per year. Calculate the return on investment of the project a. 35% b. 36% c. 37% d. None of the choices
Three mutually exclusive alternatives are being considered. A B C Initial Investment $50,000 $22,000 $15,000 Annual Net Income $5,093 $2,077 $1,643 Rate of Return 8% 7% 9% Each alternative has a 20-year useful life with no salvage value. If the MARR is 7%, which alternative should be selected? (ANS: ∆IRRB-C=2.14%, Eliminate B, ∆IRRA-C=7.56%, Select A) How do you work this out?
An investor is considering two mutually exclusive projects. She can obtain a 6% before tax rate of return on external investements but she requires a minimum attractive rate of return or 7% for these projects. Use a 10 year analysis period to compute the incremental rate of return from investing in Project A rather than Project B. Project A Project B initial $58500 $48500 net uniform annual income 6648 0 salvage value 10 yrs hence 30000 138000 computed rate of return 8% 11%
Three mutually exclusive alternatives may replace the current equipment. Year A B C 0 -$20,000-$24,000-$25,000 1 10,000 10,000 5,000 8- 27 2 5,000 10,000 5,000 3 10,000 8,000 5,000 4 5,000 5,000 25,000 (a) Construct a choice table for interest rates from 0% to 100%. (b) If the MARR is 12%, which alternative should be selected?