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Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 7, Problem 26P
To determine
Evaluate the statement.
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Students have asked these similar questions
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.
Q3)
For a 12% per year MARR, consider the following two investment projects:
Project A
Project B
Year
Net Cash Flow, BD
Net Cash Flow, BD
-2000
-3000
1
1000
1100
2
700
1900
3
1000
1100
4
700
Determine the following:
a) Based on Rate of Return analysis (IRR), which project would you select? Why?
b) Based on Simple Payback analysis (np), which project would you select? Why?
c) Which analysis method is better to use in engineering analysis? Why?
What do you know about the mathematical value of the internal rate of return of a project under each of the following conditions? a. The annual worth of the project is greater than zero. b. The annual worth of the project is equal to zero. c. The annual worth of the project is less than zero.
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
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- Two married couples of investors are analyzing a project where they acquired the following figures: initial investment $310,000 annual net profit of $130,000 each year for five years; salvage value of assets at the end of the fifth year $160,000. The money contributions for the initial investment were shareholders: 60% MARR 43%, bank A 20%, interest charged by the bank 45%; bank B 20% of the investment and an interest rate for the loan of 49%. Calculate the mixed MARR and determine the economic convenience of the investment by the NPVarrow_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_forwardJohn wants to invest $1 000 000. He has two options. The first option is to buy government bonds that earn 4% annually. The second option is to buy an apartment building that brings him $100 000 per year in revenues. Compare the two options in terms of their internal rates of return. (Your answer in the answer box should be either 1 or 2). Calculations should be provided.arrow_forward
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