1. Assume you have two investment alternatives and they are not mutually exclusive as follows + Year 0 1 2 3 Cash flow (A) Cash flow (B) 200,000 70,000 60,500 40, 500 80,000 50,000 120,000 60,000 And the required return is 10 percent for both projects. Required: Evaluate which one of these projects you will select based on the capital budgeting criteria; the discounted payback period and NPY.

1. Assume you have two investment alternatives and they are not mutually exclusive as follows + Year 0 1 2 3 Cash flow (A) Cash flow (B) 200,000 70,000 60,500 40, 500 80,000 50,000 120,000 60,000 And the required return is 10 percent for both projects. Required: Evaluate which one of these projects you will select based on the capital budgeting criteria; the discounted payback period and NPY.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Project New notebook for sales staff Remodel for distribution center On-ate day care center Employee…

A: The expected rate of return implies the anticipated gain or loss an investor expects from an…

Q: Given the following project alternatives, determine the most economical investment given an MARR of…

A: The MARR is a economic and funding thought used in a range of decision-making processes, in…

Q: 8-33 The owner of a downtown parking lot has employed a civil engineering consulting firm to advise…

A: PLEASE FIND THE ANSWER BELOW.

Q: 5. Fred, a city politician is advocating for a new dock and pier system along the river to boost…

A: Approach to solving the question: Detailed explanation: Examples: Key references:

Q: Using i of 6.5%, compare the net present worth of the net expenditures for the two proposed plans…

A: Annual worth or AW is referred to as the easy way of understanding the annual amount, for instance,…

Q: 3) Using benefit-cost ratio analysis, a 10-year useful life and a MARR of 25%, determine which of…

A: The benefit-cost ratio (BCR) is an indicator showing the relationship between the relative costs and…

Q: Each of the three alternatives shown has a 5-year useful life. MARR is 10%, a) Using FW,…

A: For alternative AFirst cost=$650Annual benefit=180For alternative BFirst cost=$500Annual…

Q: Project 1 involves an outlay of $2.5m and gets an annual net income of $1m for 5 years. Project 2…

A: Payback period shows the time taken to cover the initial investment on any project. The payback…

Q: Example 3: Applying present worth when useful lives are equal Interest: 8%; N = 6 years Alternatives…

A: By applying the present value when the best alternative will be chosen by comparing the present…

Q: A medium size manufacturing company has a budget of $200,000 to invest on five different capital…

A: For all the alternatives provided above only the ones with highest rate of return should be…

Q: This can occur when a selection among mutually eXclusive alternatives is based wrongly on…

A: When two or more investment alternatives are mutually exclusive, it implies that their cost, rate of…

Q: A new manufacturing facility will produce two products, each of which requires a drilling operation…

A: Given that; Total hour of operation, t= 2250 hours per year Machine availability of machine D1= 75%…

Q: Connor Corporation is considering two projects (see below). For your analysis, assume these projects…

A: Capital budgeting refers to the concept that helps businesses to analyze various investment and…

Q: cremental Analysis is required for mutually exclusive project analysis using which of the chniques??…

A: Incremental analysis can be defined as a technique that is used to access and compare the benefits…

Q: A new highway is to be constructed. Design A calls for a concrete pavement costing $80 per foot with…

A: Design A Concrete pavement costing = 80 per foot Three paved ditches costing = 4 per foot each…

Q: Most likely estimates for a project are as follows. Choose the correct choice below. MARR Useful…

A: Present worth refers to the value of certain investments or assets that are receivable in the future…

Q: For the given CFD if the MARR (1)-8%, the Net Present Worth, NPW is close to: $7,000 Benefits $2.000…

A: We have given the cash flow diagram representing the cost and benefit of a project and MARR =8%.The…

Q: 3. The four independent projects shown below are under consideration by Revamonte Packing. Given:…

A: Independent project: A project that is independent of all other projects and is not one of them. An…

Q: 6.1 A dam is proposed on a stretch of wild river, a river that is currently used for recreation. The…

A: Step 1:Part a: NPV at a 3% Discount RateGiven:Initial Cost = $100,000,000Annual Net Benefit B =…

Question

1. Assume you have two investment alternatives and they are not mutually exclusive
as follows +
Year
0
1
2
3
Cash flow (A) Cash flow (B)
200,000
70,000
60,500
40, 500
80,000
50,000
120,000
60,000
And the required return is 10 percent for both projects.
Required:
Evaluate which one of these projects you will select based on the capital budgeting
criteria; the discounted payback period and NPV.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Given

VIEW

Calculation of Discounted payback pERIOD

VIEW

Calculation of NPV

VIEW

Final Answer

VIEW

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

You have been asked to perform an economic evaluation of two projects and recommend one of them for implementation. The project parameters are as follows: Project A Project B Discount Rate 4.0% 4.0% Your analysis concludes that: Project Cost $1,000,000 $750,000 Project Life (yrs) 10 15 Elec. Savings Elec. Cost (kWh/yr) ($/kWh) 800,000 600,000 O Project A is preferable, but Project B also has attractive performance. O Project B is preferable, but Project A also has attractive performance. O Project B is preferable and Project A results in a net loss. O Project A is preferable and Project B results in a net loss. $0.12 $0.12 Annual Cost Escalation Rate 1.5% 1.5%
# 3 QUESTION 10 Suppose the MARR is 5%. Use the following table to answer the question-Which option should be selected as the base alternative? Initial Investment Annual Revenue Useful Life (Years) E D $ 4 R CMS A. Neither option is acceptable as a base alternative. OB. Both options are acceptable base alternatives. OC. FMS OD. I'm completely lost! E. CMS F Click Save and Submit to save and submit. Click Save All Answers to save all answers. 888 74 $31,000 $38,000 6,866 % FMS 5 T 9,201 G 6 MacBook FO H & 7 F7 U +00 8 J 9 K Save All Answers P 7.
1.) Clinix is considering four independent projects. Given: All the projects will be economically viable for only 10 years; Company’s MARR = 12% per year Find: Which project should be selected based on a present worth analysis. *Note* Financial values are in $1,000 units. Project A Project B Project C Project D First Cost ($) -2,700 -1,400 -10,000 -9,500 Annual Net Profit ($/year) 800 1,200 2,400 3,200 Salvage Value ($) 25 30 45 60
a. Find the breakeven market value.b.Find the breakeven annual expense.C.Is the decision more sensitive to changes in market value or annual expense? How doyou know?
Given cash flows for two alternatives as shown in table below, choose the most attractive alternative if MARR = 8%. Year 0 1 2 3 through ∞ Alt. A -$42K $3.6K $3.6K $3.6K Alt. B -$54K $4.7K $4.7K $4.7K Group of answer choices Alt. A Alt. B Select neither Select either