EBK CONTEMPORARY ENGINEERING ECONOMICS
6th Edition
ISBN: 9780134123950
Author: Park
Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)
expand_more
expand_more
format_list_bulleted
Question
Chapter 7, Problem 37P
(a):
To determine
Calculate the
(b):
To determine
Acceptability of the project.
(c):
To determine
Calculate the MIRR.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Suppose we have four mutually exclusive projects, D1, D2, D3, and D4, whose internal rates of return on incremental investment between the projects is given as follows:IRR (Dl - D2) = 27.62%IRR {Dl - D3) = 14.26%IRR {Dl - D4) = 25.24%IRR (D3 - D2) = 30.24%IRR (D2- D4) = 17.34%IRR (D3 - D4) = 16.14%Which project should be selected at MARR 15%?
Consider the two investments with the following sequences of cash flows
Compute for i* for each investment
What are the NPW of each alternatives with an MARR of 15%
If A & B are mutually exclusive, which project is more economically desirable? (Incremental)
Consider two investments A and B with the sequences of cash flows given in the table below.
A) If A and B are mutually exclusive? projects, which project would you select based on the rate of return on incremental investment at
MARRequals=6?%?
The rate of return on the incremental investment is ?
Chapter 7 Solutions
EBK CONTEMPORARY ENGINEERING ECONOMICS
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
Knowledge Booster
Similar questions
- You invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it will be worth $15,000 at the end of two years. The machine will be used for 4,000 hours during the first year and 6,000 hours during the second year. The expected savings associated with the use of the piece of equipment will be $28,000 during the first year and $40,000 during the second year. Your interest rate is 10%.(a) What is the capital recovery cost?(b) What is the annual equivalent worth?(c) What is net savings generated per machine-hour?arrow_forwardSuppose you are using Present Worth Analysis and the useful life for project A is 17 years and for Project B it is 13 years. The projects are for improvements to a manufacturing facility that is expected to be used for 30 years. The most appropriate analysis period in this situation would be? 13 years 221 years None of these answers is correct 17 years 30 yearsarrow_forwardYou have found an investment that pays 0.5% each week. What is the effective annual rate of return for this investment? Question 15.8%24.7% 26% 29.6%arrow_forward
- Consider the following two mutually exclusive investment projects: Determine the range of MARR where Project 2 would be preferred over Project 1 with "do-nothing" alternative.(a) MARR ≤ 11.80%(b) MARR ≥ 11.80%(c) 11.80% ≤ MARR ≤ 18.88%(d) MARR ≤ 18.88%arrow_forward1. Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping equipment is estimated at P3,000. Taxes and insurance for both are 2.5% of the first cost. Money is worth 18% effective.Which alternative should be used? Write a brief interpretation of your answers. (USE PW and EUAC)arrow_forwardCT Corp. is considering two mutually exclusive projects. Both require an initial investment of P120,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of P67,000 and P75,000 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of P38,500 at the end of each of the next 4 years. Each project has a WACC of 8%. Listed below are the requirements for this data set: Using the replacement chain approach, how much is the NPV of Project X? (Round the final answer to the nearest peso. Use the "NPV formula" in excel for exact computation. Otherwise, answer based on rounded pv factors will also be accepted.) Which of the two projects will be more profitable considering the replacement chain approach on the NPV of Project X? Using the equivalent annuity approach, what is the equivalent annuity of Project Y?…arrow_forward
- On land worth P800,000 an investor constructs a building worth P3,000,000 containing a theater , a bank, stores and offices. The owner estimates that the annual receipts from rentals will be P720,000, and annual expenses to cover taxes, insurance and maintenance of the building will be P80,000. He also estimates that the land can be sold for P1,200,000, the building for P2,000,000 at the end of 20 years. If his money is now earning 15% before taxes, what is the rate of return to justify this investment?arrow_forwardIf a project costs $90,000 and is expected to return $24,500 annually, how long does it take to recover the initial investment? What would be the discounted payback period at i=14%? Assume that the cash flows occur continuously throughout the year. The payback period is___________years. (Round to one decimal place.)arrow_forwardConsider the following two mutually exclusive service projects with projectlives of three years and two years, respectively. (The mutually exclusive service projects will have identical revenues for each year of service.) The interest rate is known to be 12%. Net Cash Flow End of Year Project A Project B 0 -$1,000 -$800 1 -400 -200 2 -400 -200+0 3 -400+200 If the required service period is six years and both projects can be repeated with the given costs and better service projects are unavailable in the future, which project is better and why? Choose from the following options:(a) Select Project B because it will save you $344 in present worth over the required service period.(b) Select Project A because it will cost $1,818…arrow_forward
- Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of serv Two installations are being considered to provide for water storage in a chemical plant. A tank on a tower or a tank of equal capacity placed on a hill some distance from the plant. The cost of installing the tank and tower is estimated at P350,000. The cost of installing the tank on the hill, including the extra length of service lines, is estimated at P300,000. The hill installation will require an additional investment of P30,000 in pumping equipment whose life is estimated to be 15 years with a salvage value of P2,500. The life of the two installations is estimated to be 30 years. Annual cost of labor, electricity, and maintenance incident to the pumping…arrow_forwardYou are considering a luxury apartment building project that requires an investment of $14,500,000. The building has 60 units. You expect the maintenance cost for the apartment building to be $450,000 the first year and $490,000 the second year. The maintenance cost will continue to increase by $40,000 in subsequent years. The cost to hire a manager for the building is estimated to be $100,000 per year. After five years of operation, the apartment building can be sold for $18,000,000. What is the annual rent per apartment unit that will provide a return on investment of 17%? Assume that the building will remain fully occupied during its five years of operation. The annual rent per apartment unit should be $ ______thousand. (Round to one decimal place.).arrow_forwardYou are being asked to evaluate the worthiness of an investment that requires you to spend $100,000 today in return for receiving $30,000 each year for seven years, beginning four years from now. Which of the following statements is TRUE If the MARR = 10%, I would conclude that this is a profitable investment. Present Worth = $30,000 X 7 - $100,000. If the MARR = 10%, I would conclude that this is not a profitable investment.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning