1. You need to know whether you want to expand a new gas processing facility is justified under the following conditions: The proposal is for purchasing a separation unit costing CAD 200,000. The unit has an expected useful life of 35 years and a net salvage value (net proceeds from sale after tax adjustments) of CAD 35,000. Annual receipts of CAD 37,000 are expected, annual maintenance and administrative cost will be CAD 8000/year, and annual income taxes are CAD 5000. Given the foregoing data, which of the following statements are correct? Justify your answer. a. The proposal is justified for a MARR of 9%. b. The proposal has a net present worth of CAD 152,512 when 6% is used as the interest rate. c. The proposal is acceptable as long as MARR ≤ 11.81%. d. All of the proceedings are correct.

1. You need to know whether you want to expand a new gas processing facility is justified under the following conditions: The proposal is for purchasing a separation unit costing CAD 200,000. The unit has an expected useful life of 35 years and a net salvage value (net proceeds from sale after tax adjustments) of CAD 35,000. Annual receipts of CAD 37,000 are expected, annual maintenance and administrative cost will be CAD 8000/year, and annual income taxes are CAD 5000. Given the foregoing data, which of the following statements are correct? Justify your answer. a. The proposal is justified for a MARR of 9%. b. The proposal has a net present worth of CAD 152,512 when 6% is used as the interest rate. c. The proposal is acceptable as long as MARR ≤ 11.81%. d. All of the proceedings are correct.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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