ENGINEERING ECONOMY W/CONNECT(LL)
ENGINEERING ECONOMY W/CONNECT(LL)
8th Edition
ISBN: 9781307168761
Author: Blank
Publisher: MCG/CREATE
Question
Chapter 18, Problem 1P
To determine

Calculate annual worth.

Expert Solution & Answer
Check Mark

Explanation of Solution

Investment (INV) is $850,000. Lowest range of revenue (LR) is $290,000 per year. Highest range of revenue (HR) is $$325,000 per year. Time period (n) is 5. Rate of return (i) is 2%.

Annual worth (AW) for the lowest range of earning can be calculated as follows.

AW=INV(i(1+i)n(1+i)n1)+LR=850,000(0.2(1+0.2)5(1+0.2)51)+290,000=850,000(0.33438)+290,000=5,777

Annual worth of the project with the lowest expected earnings per year is $5,777.

Annual worth (AW) for the highest range of earning can be calculated as follows.

AW=INV(i(1+i)n(1+i)n1)+HR=850,000(0.2(1+0.2)5(1+0.2)51)+325,000=850,000(0.33438)+325,000=40,777

Annual worth of the project with highest expected earnings per year is $40,777.

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