Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 7, Problem 14P
(a):
To determine
Calculate the possible number of interest rate.
(b):
To determine
Calculate the net present wroth curve.
(c):
To determine
Calculate the
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Students have asked these similar questions
Projects A and B are mutually exclusive. The minimum attractive rate of return (MARR) is 12%.
Using rate of return analysis, which project should be selected?
If the image fails to load here, go to https://www.dropbox.com/s/ld6wctqieu8jgwp/ROR.jpg >>
Year
0
A
B
- $750
- $1,150
B-A
- $400
123
$200
$300
$100
$200
$350
$150
$200
$400
$200
4
$600
$700
$100
ROR
17.68%
16.44%
13.69%
Project A
Project B
Both Project A and B
Select none of the project.
Insufficient information to make a decision.
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.
Cash Payback Period, Net Present Value Method, and Analysis
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:
Year
Plant Expansion
Retail Store Expansion
1
$450,000
$500,000
2
450,000
400,000
3
340,000
350,000
4
280,000
250,000
5
180,000
200,000
Total
$1,700,000
$1,700,000
Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis.
Present Value of $1 at Compound Interest
Year
6%
10%
12%
15%
20%
1
0.943
0.909
0.893
0.870
0.833
2
0.890
0.826
0.797
0.756
0.694
3
0.840
0.751
0.712
0.658
0.579
4
0.792
0.683
0.636
0.572
0.482
5
0.747
0.621
0.567
0.497
0.402
6
0.705
0.564
0.507
0.432
0.335
7
0.665
0.513
0.452
0.376
0.279
8
0.627
0.467
0.404
0.327
0.233
9
0.592
0.424
0.361
0.284
0.194
10
0.558
0.386
0.322
0.247
0.162
Required:
1a. Compute the cash payback period for each project.…
Chapter 7 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10P
Ch. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Consider an investment project with the cash flows...Ch. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Consider the investment projects given in Table...Ch. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Consider the two mutually exclusive investment...Ch. 7 - You are considering two types of automobiles....Ch. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Fulton National Hospital is reviewing ways of...Ch. 7 - Prob. 48PCh. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Prob. 53PCh. 7 - Prob. 54PCh. 7 - Prob. 55PCh. 7 - Prob. 56PCh. 7 - Prob. 57PCh. 7 - Prob. 1STCh. 7 - Prob. 2STCh. 7 - Prob. 3STCh. 7 - Prob. 4STCh. 7 - Prob. 5ST
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Similar questions
- If a company must choose between two projects, it should proceed with the one that generates a higher IRR True Falsearrow_forwardSuppose Omni Consumer Products's CFO is evaluating a project with the following cash inflows. She does not know the project's initial cost; however, she does know that the project's regular payback period is 2.5 years. Year Cash Flow Year 1 $350,000 Year 2 $400,000 Year 3 $475,000 Year 4 $475,00 If the project's weighted average cost of capital (WACC) is 9%, what is its NPV? $373,562 $336,206 $317,528 $429,596arrow_forwardConsider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment P 180,000 Revenues P 350,000 per year Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter a. Determine the Annual Worth (AW) of each project. b. Determine the Internal Rate of Return (IRR) of each project. c. Determine the External Rate of Return (ERR) of each project. Salvage Value P 40,000arrow_forward
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