ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Chapter 6, Problem 50P
To determine

Introduction: Cash flow analysis is the analysis by which cash inflows and outflows from various activities are evaluated. This helps a company understand the way money is being generated in a company and the value of the company.

To select: The project based on cash flow analysis.

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A manufacturing company is proposing two new methods to enhance and increase the production line of the company. Method A is expected to cost $1000 while method B is expected to cost $2400. The maintenance cost of the production line will increase to $800 per year if method A is applied and $650 per year with method B, which one of the two proposed methods is more economical based on a future worth analysis at an interest rate of 10% per year? Assume a 15-year life for the production line.
Four different choices are given to determine the unknown value of "X" from the cash flow diagram given below. Use an interest rate of i =6%.
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