Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 16, Problem 15P
To determine
Selection of the alternate.
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The government is considering undertaking one of the four projects A1, A2, A3, and A4. These projects are mutually exclusive, and the estimated present values of their costs and of their benefits are shown in millions of dollars as follows:
All of the projects have the same duration. Assuming that there is no donothing alternative, which alternative would you select? Justify your choice by using a benefit-cost ratio on incremental investment (BC(i)).
Payback Period and Net Present Value If a project with conventional cash flows has a payback period less than the project’s life, can you definitively state the algebraic sign of the NPV? Why or why not? If you know that the discounted payback period is less than the project’s life, what can you say about the NPV? Explain. Q
A rural community/company is considering an investment in a cottage industry for which the net cash flows have been estimated as follows:
i) What is the NPV if the discount rate is 10%?
ii) Using discount rates of 10% and 14% calculate the IRR?
iii) Is this project acceptable?
Chapter 16 Solutions
Contemporary Engineering Economics (6th Edition)
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