1.Three mutually exclusive design alternatives are being considered. Theestimated cash flows for each alternative are given in the table below. The MARR ofthe company is 20% per year. At the end of its useful life, the investment will be soldwith end-of-life market values given in the table.AB$28,000 $55,000$15,000$13,000$23,000 $28,000$8,00010 years24.7%Investment costAnnual expensesAnnual revenuesMarket value at the end of life $6,000Useful life10 yearsIRR26.4%с$40,000$22,000$32,000$10,00010 years22.4%(a) Explain why the decision should not be made by comparing IRR values for thethree alternatives.(b) Recommend the best alternative by using an appropriate method.

The provided questions include MARR and viable alternatives, which fall under the core Economics…

1. Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given in the table below. The MARR of the company is 20% per year. At the end of its useful life, the investment will be sold with end-of-life market values given in the table. A B с $28,000 $55,000 $40,000 $15,000 $13,000 $22,000 $23,000 $28,000 $32,000 $8,000 $10,000 10 years 10 years 24.7% 22.4% Investment cost Annual expenses Annual revenues Market value at the end of life $6,000 Useful life 10 years IRR 26.4% (a) Explain why the decision should not be made by comparing IRR values for the three alternatives. (b) Recommend the best alternative by using an appropriate method.

1. Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given in the table below. The MARR of the company is 20% per year. At the end of its useful life, the investment will be sold with end-of-life market values given in the table. A B с $28,000 $55,000 $40,000 $15,000 $13,000 $22,000 $23,000 $28,000 $32,000 $8,000 $10,000 10 years 10 years 24.7% 22.4% Investment cost Annual expenses Annual revenues Market value at the end of life $6,000 Useful life 10 years IRR 26.4% (a) Explain why the decision should not be made by comparing IRR values for the three alternatives. (b) Recommend the best alternative by using an appropriate method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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