Two alternatives are being considered for a water resources project. Alternative A has a project lifetime of 40 years. Alternative B has a project lifetime of 30 years. The timeseries of benefits and costs for the projects are provided below. Find the equivalent. present value and equivalent annual value for each project, assuming an 8% interest rate. Which project is preferred from an economic perspective? Alternative Year 10 A B 50 40 Alternative Year 10 A B 10 35 Benefits ($ million) Year 20 Year 30 Year 10 0 10 20 Costs ($ Year 20 0 0 20 15 million) Year 30 10 5 Year 10 0

Two alternatives are being considered for a water resources project. Alternative A has a project lifetime of 40 years. Alternative B has a project lifetime of 30 years. The timeseries of benefits and costs for the projects are provided below. Find the equivalent. present value and equivalent annual value for each project, assuming an 8% interest rate. Which project is preferred from an economic perspective? Alternative Year 10 A B 50 40 Alternative Year 10 A B 10 35 Benefits ($ million) Year 20 Year 30 Year 10 0 10 20 Costs ($ Year 20 0 0 20 15 million) Year 30 10 5 Year 10 0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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MARR 20% EOY Cash Flow 0 $(70,000.00) 1 $ 20,000.00 2 $ 19,000.00 3 $ 18,000.00 4 $ 17,000.00 5 $ 16,000.00 6 $ 15,000.00 7 $ 14,000.00 8 $ 13,000.00 9 $ 12,000.00 10 $ 11,000.00 11 $ 10,000.00 12 $ 9,000.00 13 $ 8,000.00 14 $ 7,000.00 15 $ 6,000.00 16 $ 5,000.00 17 $ 4,000.00 18 $ 3,000.00 19 $ 2,000.00 20 $ 1,000.00 Plot a graph of FW versus MARR, where MARR varies from 0 percent to 50 percent by 1 percent increments.FW should be on the y-axis and MARR on the x-axis.
Littrell's Nursery needs a new irrigation system. System one will cost $145,000, have annual maintenance costs of $10,000, and need an overhaul at the end of year six costing $30,000. System two will have first year maintenance costs of $5,000 with increases of $500 each year thereafter. System two would not require an overhaul. Both systems will have no salvage value after 12 years. If Littrell's cost of capital is 4%, using annual worth analysis determine the maximum Littrell's should be willing to pay for system two.
01. Two alternatives have the following cash flows: alternative End of Year A B - $2800 + $1100 - $2000 1 + $800 2 + $800 + $1100 3 + $800 + $1100 4 + $800 + $1100 At a minimum attractive rate of return (MARR) 12%, which alternative should be selected? Use the present and future worth analysis.
Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR = 10% per year. "Do Nothing" is not an option. A B $15,000 $16,100 240 290 1,000 1,250 -$41,731 - $45,131 Capital investment Annual costs Market value at EOY 10 FW (10%) Click the icon to view the interest and annuity table for discrete compounding when i = 10% per year. The FW of the alternative C is $. (Round to the nearest dollar.) Select the preferred alternative. Choose the correct answer below. OA. Alternative C OB. Alternative A OC. Alternative B O D. Alternative D D $17,900 110 1,950 ??? - $46,231 с $12,500 450 1,800
A Cost $4000 $2000 $6000 $1000 $9000 Annual benefit 639 410 761 117 750 Useful life, in years 20 20 20 20 20 i* 15% 20% 11.1% 9.9% 5.45% Perform incremental ROR analysis to select best one. MARR=6%; (P/A, 6%, 20) = 11.47 %3D
A project is being planned that has an initial investment at time 0, annual revenuesand expenses, and a salvage value at the end of the project lifespan (20 years). The financialvalues are summarized below:Initial investment amount at time 0 $150,000Estimated annual revenue $34,500 per yearEstimated annual expenses $8,700 per yearEstimated salvage value at end of lifespan $10,000Minimum attractive rate of return (MARR) 15%a. Calculate the capital recovery amount CR(i%).b. Using the annual worth (AW) method, determine whether purchasing the equipmentis economically justified.c. Repeat part (a) using the internal rate of return (IRR) method based on annual worth(AW).d. Using the present worth (PW) method, determine the break-even time period afterwhich purchase of the equipment generates a profit. (Find N when PW = 0) year period.
Given the financial data for three alternatives Initial cost EUAB Life ROR A $600 82 10 years 6.1% O True O False B $1,200 196 10 years 10.1% MARR - 8% AROR (B-C) - 9.2% The most attractive alternative for a MARR of 8% is Alt. C? C $400 70 10 years 11.7%
4. in Year Income, $1000 Cost, $1000 MJ Corp produces and sells a new model of photoxaltais. (PV). Annual cash flows are shown table below. Determine the future worth of the net cash flows at an interest of 10% per year. 8 per year. 1 200 90 2 200 90 3 200 90 4 200 90 5 200 90 6 Don't use excel and please don't upload answers that were already posted 200 90 7 200 90 200 Hide Transcribed Text 4. MJ Corp produces and sells a new model of photovaltaic (PV). Annual cash flows are shown in table below. Determine the future worth of the net cash flows at an interest of 10% 90
Project A costs $35,000 initially, has a 4-year life and incurs $4,000 in annual year-end costs. Project B costs $39,000 initially, has a 5-year life and incurs $4,500 in annual year-end costs. If the company's required return is 10%, calculate the equivalent annual cost of each project. Options Project A $16,788; Project B $15,211 Project A $13,452; Project B $12,924 Project A $15,041; Project B $14,788 Project A $12,623; Project B $11,679 Project A $14,190; Project B $13,250
Most likely estimates for a project are as follows. MARR Useful life Initial investment Receipts - Expenses (R-E) Click the icon to view the relationship between the PW and the percent change in parameter. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12per year. (a) Determine whether the statement "An initial investment of $7,150 keeps the investment economical." is true or false. True False (b) To which variable is the PW most sensitive to? OA. Usefule life B. Receipts Expenses 12% per year 14 years $5,500 $1,000/year OC. Initial Investment
Use Present Worth Analysis to determine whether Alternative A or B should be chosen. Items are identically replaced at the end of their useful lives. Assume an interest rate of 6% per year, compounded annually. Alternative A Alternative B Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 400 40 170 2 1,000 48 257 3 O Alternative A, because it costs $736.29 less than Alternative B, in terms of present worth Alternative B, because it costs $736.29 more than Alternative A, in terms of present worth Alternative A, because its present worth is positive Alternative B, because it only incurs the initial cost once every three years instead of every two years
Which alternatives can be eliminated immediately in the first step of incremental rate of return analysis, if MARR = 10.0%? Do-nothing A B C D First cost 10 $6,000 $4,500 $9,500 $9,500 Annual 0 998 829 1,716 1,384 benefit Life 10 yrs ROR 10.5% 13.0% 12.5% 7.5% D only not enough information попе D and C