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1. a) A factory has a projected cash flow for a business activity as follows: $ -100,000 $-150,000 $ 150,000 $ 400,000 Year 0 Year 1 Year 2 Year 3 Assuming each cash flow occurs at the end of the year and an interest rate of 8%, what is the annual worth (uniform annual income) of this activity over the 3-year period? b) A factory has two alternatives for manufacturing a certain device: Buy a machine for $2000 which would permit the device to be manufactured for $3.00 per unit. Buy a machine for $20,000 which would permit the device to be manufactured for $1 per unit. Plan 1: Plan 2: Assuming a volume of 3000 devices per year, what is the break even year for these two plans? Ignore discounting.

1. a) A factory has a projected cash flow for a business activity as follows: $ -100,000 $-150,000 $ 150,000 $ 400,000 Year 0 Year 1 Year 2 Year 3 Assuming each cash flow occurs at the end of the year and an interest rate of 8%, what is the annual worth (uniform annual income) of this activity over the 3-year period? b) A factory has two alternatives for manufacturing a certain device: Buy a machine for $2000 which would permit the device to be manufactured for $3.00 per unit. Buy a machine for $20,000 which would permit the device to be manufactured for $1 per unit. Plan 1: Plan 2: Assuming a volume of 3000 devices per year, what is the break even year for these two plans? Ignore discounting.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1. a) A factory has a projected cash flow for a business activity as follows: $ -100,000 $-150,000 $ 150,000 $ 400,000 Year 0 Year 1 Year 2 Year 3 Assuming each cash flow occurs at the end of the year and an interest rate of 8%, what is the annual worth (uniform annual income) of this activity over the 3-year period? b) A factory has two alternatives for manufacturing a certain device: Buy a machine for $2000 which would permit the device to be manufactured for $3.00 per unit. Buy a machine for $20,000 which would permit the device to be manufactured for $1 per unit. Plan 1: Plan 2: Assuming a volume of 3000 devices per year, what is the break even year for these two plans? Ignore discounting.
Transcribed Image Text:1. a) A factory has a projected cash flow for a business activity as follows: $ -100,000 $-150,000 $ 150,000 $ 400,000 Year 0 Year 1 Year 2 Year 3 Assuming each cash flow occurs at the end of the year and an interest rate of 8%, what is the annual worth (uniform annual income) of this activity over the 3-year period? b) A factory has two alternatives for manufacturing a certain device: Buy a machine for $2000 which would permit the device to be manufactured for $3.00 per unit. Buy a machine for $20,000 which would permit the device to be manufactured for $1 per unit. Plan 1: Plan 2: Assuming a volume of 3000 devices per year, what is the break even year for these two plans? Ignore discounting.
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