(a)
To construct:A choice table for interest tables from 0% to 100%
(a)
Answer to Problem 35P
From table below, from 0% to 6%, Plan B should be preferred. Between 7% to 12% Plan C should be preferred. Beyond that Plan A should be selected
Explanation of Solution
NPV of Plan B
NPV of Plan C
Choice table for interest from 0% to 100%
Interest rate | (P/A,i,15) | (P/F,i,15) | Plan A | Plan B | Plan C |
0% | 15.00 | 1.00 | 314,500 | 401,250 | 353,000 |
1% | 13.87 | 0.86 | 277,491 | 349,203 | 310,657 |
2% | 12.85 | 0.74 | 244,656 | 302,909 | 273,048 |
3% | 11.94 | 0.64 | 215,448 | 261,626 | 239,557 |
4% | 11.12 | 0.56 | 189,400 | 224,719 | 209,657 |
5% | 10.38 | 0.48 | 166,112 | 191,642 | 182,896 |
6% | 9.71 | 0.42 | 145,238 | 161,925 | 158,885 |
7% | 9.11 | 0.36 | 126,482 | 135,162 | 137,289 |
8% | 8.56 | 0.32 | 109,588 | 111,001 | 117,818 |
9% | 8.06 | 0.27 | 94,335 | 89,139 | 100,220 |
10% | 7.61 | 0.24 | 80,531 | 69,311 | 84,279 |
11% | 7.19 | 0.21 | 68,008 | 51,287 | 69,805 |
12% | 6.81 | 0.18 | 56,623 | 34,867 | 56,634 |
13% | 6.46 | 0.16 | 46,248 | 19,874 | 44,621 |
14% | 6.14 | 0.14 | 36,772 | 6,156 | 33,640 |
15% | 5.85 | 0.12 | 28,100 | (6,422) | 23,583 |
16% | 5.58 | 0.11 | 20,146 | (17,979) | 14,351 |
17% | 5.32 | 0.09 | 12,835 | (28,619) | 5,859 |
18% | 5.09 | 0.08 | 6,103 | (38,434) | (1,967) |
19% | 4.88 | 0.07 | (110) | (47,505) | (9,194) |
20% | 4.68 | 0.06 | (5,855) | (55,905) | (15,880) |
21% | 4.49 | 0.06 | (11,176) | (63,697) | (22,078) |
22% | 4.32 | 0.05 | (16,114) | (70,938) | (27,833) |
23% | 4.15 | 0.04 | (20,705) | (77,678) | (33,186) |
24% | 4.00 | 0.04 | (24,981) | (83,964) | (38,175) |
25% | 3.86 | 0.04 | (28,970) | (89,835) | (42,832) |
26% | 3.73 | 0.03 | (32,698) | (95,328) | (47,185) |
27% | 3.60 | 0.03 | (36,187) | (100,474) | (51,262) |
28% | 3.48 | 0.02 | (39,458) | (105,303) | (55,086) |
29% | 3.37 | 0.02 | (42,528) | (109,841) | (58,677) |
30% | 3.27 | 0.02 | (45,416) | (114,112) | (62,055) |
31% | 3.17 | 0.02 | (48,134) | (118,137) | (65,237) |
32% | 3.08 | 0.02 | (50,697) | (121,934) | (68,238) |
33% | 2.99 | 0.01 | (53,117) | (125,523) | (71,073) |
34% | 2.90 | 0.01 | (55,405) | (128,918) | (73,753) |
35% | 2.83 | 0.01 | (57,571) | (132,134) | (76,291) |
36% | 2.75 | 0.01 | (59,623) | (135,183) | (78,697) |
37% | 2.68 | 0.01 | (61,571) | (138,078) | (80,981) |
38% | 2.61 | 0.01 | (63,421) | (140,830) | (83,151) |
39% | 2.55 | 0.01 | (65,180) | (143,449) | (85,215) |
40% | 2.48 | 0.01 | (66,854) | (145,942) | (87,180) |
41% | 2.42 | 0.01 | (68,450) | (148,320) | (89,053) |
42% | 2.37 | 0.01 | (69,973) | (150,589) | (90,840) |
43% | 2.31 | 0.00 | (71,426) | (152,757) | (92,547) |
44% | 2.26 | 0.00 | (72,816) | (154,829) | (94,179) |
45% | 2.21 | 0.00 | (74,145) | (156,812) | (95,740) |
46% | 2.17 | 0.00 | (75,417) | (158,712) | (97,235) |
47% | 2.12 | 0.00 | (76,637) | (160,532) | (98,668) |
48% | 2.08 | 0.00 | (77,806) | (162,279) | (100,042) |
49% | 2.04 | 0.00 | (78,929) | (163,956) | (101,361) |
50% | 2.00 | 0.00 | (80,007) | (165,567) | (102,628) |
51% | 1.96 | 0.00 | (81,043) | (167,117) | (103,847) |
52% | 1.92 | 0.00 | (82,040) | (168,607) | (105,019) |
53% | 1.88 | 0.00 | (83,000) | (170,042) | (106,147) |
54% | 1.85 | 0.00 | (83,925) | (171,425) | (107,234) |
55% | 1.82 | 0.00 | (84,816) | (172,758) | (108,282) |
56% | 1.78 | 0.00 | (85,675) | (174,044) | (109,293) |
57% | 1.75 | 0.00 | (86,505) | (175,286) | (110,269) |
58% | 1.72 | 0.00 | (87,306) | (176,485) | (111,211) |
59% | 1.69 | 0.00 | (88,080) | (177,644) | (112,121) |
60% | 1.67 | 0.00 | (88,828) | (178,764) | (113,002) |
61% | 1.64 | 0.00 | (89,552) | (179,848) | (113,853) |
62% | 1.61 | 0.00 | (90,253) | (180,897) | (114,678) |
63% | 1.59 | 0.00 | (90,931) | (181,913) | (115,476) |
64% | 1.56 | 0.00 | (91,589) | (182,898) | (116,249) |
65% | 1.54 | 0.00 | (92,226) | (183,852) | (116,999) |
66% | 1.51 | 0.00 | (92,844) | (184,778) | (117,726) |
67% | 1.49 | 0.00 | (93,443) | (185,676) | (118,431) |
68% | 1.47 | 0.00 | (94,025) | (186,548) | (119,116) |
69% | 1.45 | 0.00 | (94,590) | (187,394) | (119,781) |
70% | 1.43 | 0.00 | (95,139) | (188,217) | (120,427) |
71% | 1.41 | 0.00 | (95,672) | (189,016) | (121,054) |
72% | 1.39 | 0.00 | (96,191) | (189,793) | (121,665) |
73% | 1.37 | 0.00 | (96,695) | (190,549) | (122,258) |
74% | 1.35 | 0.00 | (97,186) | (191,285) | (122,836) |
75% | 1.33 | 0.00 | (97,663) | (192,001) | (123,398) |
76% | 1.32 | 0.00 | (98,128) | (192,698) | (123,946) |
77% | 1.30 | 0.00 | (98,581) | (193,377) | (124,479) |
78% | 1.28 | 0.00 | (99,023) | (194,039) | (124,998) |
79% | 1.27 | 0.00 | (99,453) | (194,684) | (125,505) |
80% | 1.25 | 0.00 | (99,872) | (195,312) | (125,998) |
81% | 1.23 | 0.00 | (100,282) | (195,926) | (126,480) |
82% | 1.22 | 0.00 | (100,681) | (196,524) | (126,950) |
83% | 1.20 | 0.00 | (101,070) | (197,108) | (127,408) |
84% | 1.19 | 0.00 | (101,450) | (197,678) | (127,856) |
85% | 1.18 | 0.00 | (101,822) | (198,235) | (128,293) |
86% | 1.16 | 0.00 | (102,184) | (198,779) | (128,720) |
87% | 1.15 | 0.00 | (102,539) | (199,310) | (129,137) |
88% | 1.14 | 0.00 | (102,885) | (199,829) | (129,544) |
89% | 1.12 | 0.00 | (103,223) | (200,337) | (129,943) |
90% | 1.11 | 0.00 | (103,554) | (200,833) | (130,332) |
91% | 1.10 | 0.00 | (103,878) | (201,318) | (130,713) |
92% | 1.09 | 0.00 | (104,194) | (201,793) | (131,086) |
93% | 1.08 | 0.00 | (104,504) | (202,258) | (131,451) |
94% | 1.06 | 0.00 | (104,807) | (202,712) | (131,808) |
95% | 1.05 | 0.00 | (105,104) | (203,158) | (132,157) |
96% | 1.04 | 0.00 | (105,395) | (203,593) | (132,499) |
97% | 1.03 | 0.00 | (105,680) | (204,020) | (132,834) |
98% | 1.02 | 0.00 | (105,958) | (204,438) | (133,163) |
99% | 1.01 | 0.00 | (106,232) | (204,848) | (133,484) |
100% | 1.00 | 0.00 | (106,499) | (205,250) | (133,799) |
(b)
To select:the best alternative at expected
(b)
Answer to Problem 35P
Best alternative at expected rate of return of 10%isPlan A having highest NPV of $84,279.
Explanation of Solution
As per the choice table above, at expected rate of return of 10% Plan C has highest NPV of $84,279 as compared to other plans; hence Plan C should be preferred.
Want to see more full solutions like this?
Chapter 8 Solutions
ENGR.ECONOMIC ANALYSIS W/DASHBOARD
- Assume you are 25 years old and you are professionally employed. You are approached by two investment providers. Investment provider A guarantees you an annual payment of 325000 Rand (at current value) post retirement age of 65, increasing at a rate of 5% for 20 years after retirement age. Investment provider B guarantees you an annual payment of 375000 Rand (at current value) post retirement age of 65, increasing at a rate of 5% for 15 years after retirement age. Note: First payout is at age 66. Assume average annual inflation pre-retirement and post-retirement to be 7% and average investment growth to be 9%. Calculate the annual payments that need to be paid to the investment providers.arrow_forwardIf the interest rate is R = 0.10, (approximately) what is the Present Value of $79.20 to be received one year from today? Group of answer choices A) None of the other options. B) $71.28 C) $72 D) $72.90 E) $70.20arrow_forwarda)Your company seeks to take over Good Deal Company. Your company’s offer for Good Deal is $3,000,000 in cash upon signing the agreement followed by 10 annual payments of $300,000 starting one year later. The time value of money is 10%. Find the present worth of your company’s offer. b)Please do the Sensitivity analysis and find how sensitive the present worth to initial cash upon signing, amount of payments, their frequency and rate of returnarrow_forward
- ABC university tuition fees can be paid by on-time payment (pay total amount due when classes start at the cost of 90,000 pesos per year) or early-bird payment (pay total amount due 1 year in advance with a 10% discount). What is the amount of the savings compared to the on-time payment at the time that the on-time payment is made?arrow_forwardIf APC is 0.75 and MPC is 1, how much will be APS.arrow_forwardAn oil company plans to purchase a piece of vacant land on the corner of two busy streets for $50,000. On properties of this type, the company installs businesses of three different types. Each has an estimated useful life of 15 years. The salvage land for each is estimated to be the $50,000 land cost. Cost* $ 83,000 Type of Business Conventional gas station Add automatic carwash Add quick carwash 195,000 115,000 *Improvements cost does not include $50,000 for the land. Plan A B с Net Annual Income $26,500 39,750 31,200 (a) Construct a choice table for interest rates from 0% to 100%. (b) If the oil company expects a 10% rate of return on its investments, which plan (if any) should be selected?arrow_forward
- Precision Engineering Factory consumes 50,000 units of a component per year. The ordering, receiving and handling costs are Rs 3 per order while the trucking costs are Rs 12 per order. Further details are as follows: deterioration and obsolescence cost Rs 0.004 per unit per year; interest cost Re 0.06 per unit per year; storage cost Rs 1,000 per year for 50,000 units. Calculate the economic order quality.arrow_forwardAn analyst gathers the following information about the performance of a portfolio (S millions). The portfolio's annual time-weighted rate of return is closest to: A) 32% B)27% C) 8% Quarter Value at Beginning of Quarter Cash Inflow (Outfiow) at beginning of Quarter Value at end of quarter 1 2.0 0.2 2.4 2 2.4 0.4 2.6 3 2.6 (0.2) 3.2 4 3.2 1.0 4.1arrow_forwardPlease see attachment and type out the correct answer ASAP with proper explanation of it. Answer neatly. Will give you thumbs up only for the correct answer ASAP. Thank youarrow_forward
- A firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,998.00 per year for 8 years and costs $99,590.00. The UGA-3000 produces incremental cash flows of $29,475.00 per year for 9 years and cost $126,038.00. The firm’s WACC is 8.32%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.arrow_forwardOnly the (a) part. Answer is (6x+2y)/(12y.y+2x) but I need to know the path please. thank you.arrow_forwardProblem 2: Select one of the following two plans using the present worth method. Given i= 20% per year. 1st Cost ($) Life (years) Salvage value ($) Annual Cost ($) Plan 1 25,000 10 5,000 6,000 Plan 2 50,000 20 0 2,500arrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education