1. Find the Present Worth (PW), the Future Worth (FW), the Annual Worth (AW), and the simple payback period of the following cash flow at a Minimum Attractive Rate of Return (MARR) of 10%: Year 0 – spend $50,000; Years 1 through 6 make $12,000, and in Year 6 sell all of the left-over stuff for an additional $5,000. Do not forget you can always use FW PW(F/P,i,n) and AW = PW(A/P,i,n). Also do not forget that if one is positive then they all are positive or if one is negative then they all are negative. Answer: PW = $5,085, payback = 5 years 2. Is the project in #1 a good project? Answer: What do the "goodness" indicators show (PW, FW, AW) > 0, payback period OK? 3. If MARR in problem #1 is 15% what is the PW and is this a good project? Answer: Has PW (and also FW and AW) etc. changed sign
1. Find the Present Worth (PW), the Future Worth (FW), the Annual Worth (AW), and the simple payback period of the following cash flow at a Minimum Attractive Rate of Return (MARR) of 10%: Year 0 – spend $50,000; Years 1 through 6 make $12,000, and in Year 6 sell all of the left-over stuff for an additional $5,000. Do not forget you can always use FW PW(F/P,i,n) and AW = PW(A/P,i,n). Also do not forget that if one is positive then they all are positive or if one is negative then they all are negative. Answer: PW = $5,085, payback = 5 years 2. Is the project in #1 a good project? Answer: What do the "goodness" indicators show (PW, FW, AW) > 0, payback period OK? 3. If MARR in problem #1 is 15% what is the PW and is this a good project? Answer: Has PW (and also FW and AW) etc. changed sign
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:1. Find the Present Worth (PW), the Future
Worth (FW), the Annual Worth (AW), and the
simple payback period of the following cash
flow at a Minimum Attractive Rate of Return
(MARR) of 10%: Year 0 – spend $50,000;
Years 1 through 6 make $12,000, and in Year 6
sell all of the left-over stuff for an additional
$5,000. Do not forget you can always use FW
= PW(F/P,i,n) and AW = PW(A/Pi,n). Also do
not forget that if one is positive then they all
are positive or if one is negative then they all
are negative. Answer: PW = $5,085, payback
= 5 years
2. Is the project in #1 a good project? Answer:
What do the "goodness" indicators show (PW,
FW, AW) > 0, payback period OK?
3. If MARR in problem #1 is 15% what is the
PW and is this a good project? Answer: Has
PW (and also FW and AW) etc. changed sign
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