firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. Installed cost $40,000 $30,000 $20,000 Net annual revenue $6,400 $5,650 $5,250 Salvage value Useful life 20 years 20 years 10 years Calculated IRR 15.0% 18.2% 22.9% EOY 10, alternative IIl would be replaced with another alternative III having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should rrange (rank order) the feasible alternatives to use the incremental IRR procedure. (Hint: DN indicates "do nothing" alternative). Choose the correct answer below. DA. DN, I, II, I OB. DN, II, I, I DC. DN, II, I, II OD. LILIIL DN

firm is considering three mutually exclusive alternatives as part of an upgrade to an existing transportation network. Installed cost $40,000 $30,000 $20,000 Net annual revenue $6,400 $5,650 $5,250 Salvage value Useful life 20 years 20 years 10 years Calculated IRR 15.0% 18.2% 22.9% EOY 10, alternative IIl would be replaced with another alternative III having the same installed cost and net annual revenues. If MARR is 10% per year, which alternative (if any) should rrange (rank order) the feasible alternatives to use the incremental IRR procedure. (Hint: DN indicates "do nothing" alternative). Choose the correct answer below. DA. DN, I, II, I OB. DN, II, I, I DC. DN, II, I, II OD. LILIIL DN

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

A project is being planned that has an initial investment at time 0, annual revenuesand expenses, and a salvage value at the end of the project lifespan (20 years). The financialvalues are summarized below:Initial investment amount at time 0 $150,000Estimated annual revenue $34,500 per yearEstimated annual expenses $8,700 per yearEstimated salvage value at end of lifespan $10,000Minimum attractive rate of return (MARR) 15%a. Calculate the capital recovery amount CR(i%).b. Using the annual worth (AW) method, determine whether purchasing the equipmentis economically justified.c. Repeat part (a) using the internal rate of return (IRR) method based on annual worth(AW).d. Using the present worth (PW) method, determine the break-even time period afterwhich purchase of the equipment generates a profit. (Find N when PW = 0) year period.
A proposed project has the following costs and benefits. Using linear interpolation, the project’s discounted payback period (use i=10%) is _____________. Year Costs Benefits 0 $4,000 1 $1,200 2 $1,200 3 1,000 4 1,000 5 3,000 6 2,000 A. 6.35 years B. 5.82 years C. 4.24 years D. 3.37 years
AN INVESTMENT OF P270,000.00 ON COMPUTER SHOP WILL HAVE THE FOLLOWING DATA: UNIFORM ANNUAL REVENUE-P185,000.00 FOR 5 YEARS OPERATION AND MAINTENANCE-P85,000.00/YEAR TAXES/INSURANCE-5% OF THE FIRST COST SALVAGE VALUE OF THE COMPUTERS AFTER 5 YEARS-10% OF INVESTMENT EXPECTED EARNINGS ON CAPITAL- 25% PROVE THAT THIS INVESTMENT IS JUSTIFIABLE OR NOT BY USING FUTURE WORTH METHOD PLEASE GIVE FULL AND DETAILED SOLUTION
A new design of aircraft saves annually fuel consumption of 45,000 gallons of fuel costing$6 per gallon. The new design costs $1 million to accomplish. The airline company’s MARRis 10%. Considering only the fuel savings.What is the simple payback period for the new design? What is the discountedpayback period?
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
AN INVESTMENT OF P270,000.00 ON COMPUTER SHOP WILL HAVE THE FOLLOWING DATA: UNIFORM ANNUAL REVENUE-P185,000.00 FOR 5 YEARS OPERATION AND MAINTENANCE-P85,000.00/YEAR TAXES/INSURANCE-5% OF THE FIRST COST SALVAGE VALUE OF THE COMPUTERS AFTER 5 YEARS-10% OF INVESTMENT EXPECTED EARNINGS ON CAPITAL- 25% PROVE THAT THIS INVESTMENT IS JUSTIFIABLE OR NOT BY USING PRESENT WORTH METHOD PLEASE GIVE FULL AND DETAILED SOLUTION
Methods of Economy Studies An investment of P 250,000 can be made in a project that will produce a uniform annual revenue of P 192,800 for 5 years and then have a salvage value of 10% of the first cost. Operation and maintenance will be P 72,000 per year. Taxes and insurance will be 4% of the first cost per year. The company expects capital to earn 20% before income taxes. Show whether or not the investment is justified economically using1. Present Worth (PW) method2. Future Worth (FW) method3. Annual Worth (AW) method4. Rate of Return (ROR) method5. Payback (Payout) method
E2 A steel bridge on Louisiana state highway near the Gulf of Mexico is costing $450.000 yearlyin maintenance large chipping, priming, and painting. It originaly cost $1.600.000 when it wasbuilt 15 years ago. The Louisiana bridge engineers estimate that its remaining life is 10 years,then it will need to be replaced because of increased traffic. Its salvage value at any point intime is zero, because the cost of demolition will most like equal its value as scrap steel.A concrete bridge is considered to be the best challenger. It will cost $3.000.000 to build and$100.000 annually in maintenance costs. Its estimated life is 50 years. Its resale value may becounted as zero at any time during its life.No taxes of any kind will be considered for this government project. All costs are in constantdollars of year 0. Inflation may be ignored. Assume that annual benefits for either structure areexactly the same. A discount rate of 10 percent is to be used in analysis.(a) What is the economic life…
AN INDUSTRIAL PLANT IS CONSIDERING THE PURCHASE OF A CENTRIFUGAL PUMP. THREE OFFERS WERERECEIVED AND BASIS OF SELECTION HAVE BEEN TABULATED AS FOLLOWS: OFFER A OFFER B OFFER CPRICE OF PUMP P 60,000.00 P 96,000.00 P 120,000.00ECONIMIC LIFE (YEARS) 3 5 10SALVAGE VALUE @ END OF ECONOMIC LIFE P 5,000.00 P 10,000.00 P 8,000.00YEARLY MAINTENANCE COST 10,000.00 6,000.00 5,000.00IF COST OF MONEY IS 14%, WHAT OFFER WOULD YOU RECOMMEND TO BE PURCHASED? USE ROR METHOD.
Alternative 3 is incorrect EUAC=( Equivalent Annaul COst of Initial Investment)+ (Expected Moderate annaual flood damage cost )+ (expected severe annaual flood cost )
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?
Margaret has a project with a £ 28,000 first cost that returns £ 5,000 per year over its 10-year life. It has salvage value of £ 2,900 at the end of 10 years. If the MARR is 11 %, (Use 5 significant figures for your calculations, and round your answers to the nearest dollar. Indicate losses as a negative value.) (a) What is the present worth of this project? (b) What is the annual worth of this project? (c) What is the future worth of this project after 10 years?