Basics Of Engineering Economy
Basics Of Engineering Economy
2nd Edition
ISBN: 9780073376356
Author: Leland Blank, Anthony Tarquin
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 6, Problem 27P

For each of the following scenarios, state whether an incremental investment analysis is required to select an alternative and state why or why not. Assume that alternative Y requires a larger initial investment than alternative X and that the MARR is 20% per year.

  1. a. X has i* = 22% per year, and Y has i* = 20% per year.
  2. b. X has i* = 19% per year, and Y has i* = 21% per year.
  3. c. X has i* = 16% per year, and Y has i* = 19% per year.
  4. d. X has i* = 25% per year, and Y has i* = 23% per year.
  5. e. X has i* = 20% per year, and Y has i* = 22% per year.
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After 15 years of employment in the airline industry, John started his own consulting company to use physical and computer simulation in the analysis of commercial airport accidents on runways. He estimates his average cost of new capital at 8% per year for physical simulation projects, that is, where he physically reconstructs the accident using scale versions of planes, buildings, vehicles, etc. He has established 12% per year as his MARR. What net rate of return on capital investments for physical simulation does he expect?
When positive net cash flows are generated before the end of a project, and when these cash flows are reinvested at an interest rate that is greater than the internal rate of return, (a) The resulting rate of return is equal to the internal rate of return. (b) The resulting rate of return is less than the internal rate of return. (c) The resulting rate of return is equal to the reinvestment rate of return. (d) The resulting rate of return is greater than the internal rate of return.
How is the decision procedure used when comparing two or more mutually exclusive projects on the basis of the rate-of-return measure?

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Basics Of Engineering Economy

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