21. A project involves an initial outlay of BWP 3,000,000 and with the following transactions for the next five years. The salvage value at the end of the life of the project after five years is BWP 200,000. Draw a cash flow diagram of the project and find its present worth by assuming a market interest rate of 15%, compounded annually. End of Year | Maintenance and Operating Expenses (BWP) | Revenue (BWP) 22. 23. 24. 1 200,000 2 250,000 3 300,000 4 300,000 5 400,000 900,000 1,000,000 1,200,000 1,300,000 1,200,000 A company has two alternatives for satisfying its daily travel requirements of its employees for the next 5 years: Alternative 1: Rent a vehicle at a cost of BWP 1,000,000 per year Alternative 2: Buy a vehicle for BWP 500,000 with an operating and maintenance cost of BWP 350,000 per year. The salvage value of the vehicle after 5 years is BWP 100,000. Select the best alternative based on the present worth method of comparison using the market interest rate of 8%, compounded annually. Consider the following two mutually exclusive alteratives. A Cost (BWP) 4,000 Uniform annual benefits (BWP) Useful life (years 640 20 6,000 960 20 Using a 15% market interest rate, determine which alternative should be selected based on the future worth method of comparison. Due to the increasing awareness of customers, two different cellphone manufacturing companies started a marketing war. The details of the advertisements of the two companies are as follows: Selling price of cellphone (BWP) Amount returned to the buyer after 5 years (BWP) Brand X 15,000 8,000 Brand Y 10,000 Select the most economical brand from the customer's point of view using the future worth method of comparison, assuming a market interest rate of 15% compounded annually.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Transcribed Image Text:21. A project involves an initial outlay of BWP 3,000,000 and with the following transactions for the next five years. The salvage value at the end of the life of the project after five years is BWP 200,000. Draw a cash flow diagram of the project and find its present worth by assuming a market interest rate of 15%, compounded annually. End of Year | Maintenance and Operating Expenses (BWP) | Revenue (BWP) 22. 23. 24. 1 200,000 2 250,000 3 300,000 4 300,000 5 400,000 900,000 1,000,000 1,200,000 1,300,000 1,200,000 A company has two alternatives for satisfying its daily travel requirements of its employees for the next 5 years: Alternative 1: Rent a vehicle at a cost of BWP 1,000,000 per year Alternative 2: Buy a vehicle for BWP 500,000 with an operating and maintenance cost of BWP 350,000 per year. The salvage value of the vehicle after 5 years is BWP 100,000. Select the best alternative based on the present worth method of comparison using the market interest rate of 8%, compounded annually. Consider the following two mutually exclusive alteratives. A Cost (BWP) 4,000 Uniform annual benefits (BWP) Useful life (years 640 20 6,000 960 20 Using a 15% market interest rate, determine which alternative should be selected based on the future worth method of comparison. Due to the increasing awareness of customers, two different cellphone manufacturing companies started a marketing war. The details of the advertisements of the two companies are as follows: Selling price of cellphone (BWP) Amount returned to the buyer after 5 years (BWP) Brand X 15,000 8,000 Brand Y 10,000 Select the most economical brand from the customer's point of view using the future worth method of comparison, assuming a market interest rate of 15% compounded annually.

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