None You are faced with a decision on an investment proposal. Specifically, the estimatedadditional income from the investment is $180,000 per year; the initial investmentcosts are $640,000; and the estimated annual costs are $44,000, which begindecreasing by $4,000 per year starting at the end of the second year. Assume an 8-year analysis period, no salvage value, and MARR = 15%.(a) What is the IRR of this proposal? Is it a profitable investment? (Use i = 20% asan initial guess)(b) What are the simple and compounded payback periods at i= MARR?

To analyze the investment proposal, we'll calculate the Internal Rate of Return (IRR), the simple…

Answered: You are faced with a decision on an…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV) and internal rate of return (IRR) methods always agree. Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows. Year Project Y Project Z 0 -$1,500 -$1,500 1 $200 $900 2 $400 $600 3 $600 $300 4 $1,000 $200 NPV (Dollars) 800 600 Project Y 400 Project Z 200 -200 0246 8 10 12 14 16 18 20 COST OF CAPITAL (Percent) If the weighted average cost of capital (WACC) for each project is 14%, do the NPV and IRR methods agree or conflict? O The methods agree. O The methods conflict.
A four-year project has an initial cost of $20 000, net annual cash inflows of $10 000, and a salvage value of $5 000. Which of the following gives the project's internal rate of return (i*)? -20 000(F/P, i*, 4) + 10 000 + 5 000 = 0 -20 000(A/P, i*, 4) + 10 000 + 5 000(A/F, i*, 4) = 0 -20 000(A/F, i*, 4) + 10 000 + 5 000(A/P, i*, 4) = 0 O -20 000(P/F, i*, 4) + 10 000 + 5 000(A/F, i*, 4) = 0
Consider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. value
Vidhi is investing in some rental property in Collegeville and is investigating her income from the investment. She knows the rental revenue will increase each year, but so will the maintenance expenses. She has been able to generate the data that follows regarding this investment opportunity. Assume that all cash flows occur at the end of each year and that the purchase and sale of this property are not relevant to the study. • If Vidhi's MARR = 6% per year, is this investment a profitable undertaking? Use Future Worth method! Year Revenue Year Expenses 1 $6,000 1 $3,100 2 6,200 2 3,300 6,300 3 3,500 6,400 4 3,700 6,500 5 3,900 6,600 6 6,100 6,700 7 4,300 6,800 8 4,500 6,900 4,700 7,000 4,900 3 4 5 6 7 8 9 10 9 10
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. a. Calculate the PW and FW of this proposal? b. What is the ERR ( Ԑ=MARR) of this proposal? c. What is the Simple and Discounted payback? include the cash flow diagram and conclusion
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. a. Calculate the PW and FW of this proposal? b. What is the ERR ( Ԑ=MARR) of this proposal? c. What is the Simple and Discounted payback? (Upload the picture of your complete solutions including the correct cash flow diagram and your conclusion.)
1.a 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. Calculate the PW and FW of this proposal? Show the whole solution, not in excel please
Mary, a project manager for ABC Ic., is reviewing a product quality improvement project. She has determined that the project's Annual Worth of $3,396. for a period of 8 years. She now has to calculate the IRR for the project but unfortunately she has lost some information about the cash flows. She knows only that the project has: a 8-year project life with an initial cost of $400,000. a set of equal revenue cash flows occurred at the end of each year for 8 years, and • MARR used for calculation the Annual Worth was 8%. Find the annual revenue first and then calculate the IRR for the project = ? O 14% < IRR (i*) < 15% O 13% < IRR (i*) < 14% O 10% < IRR (i*) < 11% O 9% < IRR (i*) < 10% O 8% < IRR (i*) < 9%
Upload the picture of your complete solutions including the correct cash flow diagram (for plus points) and your conclusion. 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. a. Calculate the PW and FW of this proposal? b. What is the ERR ( Ԑ=MARR) of this proposal? c. What is the Simple and Discounted payback?
Determine the ERR of the engineering project shown below when the MARR is 189% per year and the reinvestment rate is 15% per year. Express your answer in percent rounded to the nearest hundredths. Investment cost $10,290 Expected life 7 years Market (salvage) value $894 Annual receipts $9,168| Annual expenses $5,191
A tunnel to transport water initially cost $1,000,000 and has expected maintenance costs that will occur in a 6-year cycle as shown below, assume MARR is 20% per year. note (writ all numbers without rounding and without any units) End of Year: Maintenance: $35,000 $35,000 $35,000 $45,000 $45,000 $60,000 Compute the Equivalent Annual Cost of the maintenance. Hint: Don't insert the negative sign Compute the Capitalized Cost? Hint: Don't insert the negative sign
For FW Method, if FW (i = MARR) = −30, then the project is economically _____________. justified barely justified sometimes justified unjustified none

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