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3) Consider the two mutually exclusive projects in table below: Project's Cash Flow n B1 B2 Cash Flow Salvage Value Cash Flow Salvage Value 0 -$20,000 -$17,000 1 -2,000 10,000 -2,500 9,000 2 -2,000 8,000 -2,500 6,000 3 -2,000 5,000 -2,500 3,000 4 -2,000 3,000 5 -2,000 2,000 Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%? b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?

3) Consider the two mutually exclusive projects in table below: Project's Cash Flow n B1 B2 Cash Flow Salvage Value Cash Flow Salvage Value 0 -$20,000 -$17,000 1 -2,000 10,000 -2,500 9,000 2 -2,000 8,000 -2,500 6,000 3 -2,000 5,000 -2,500 3,000 4 -2,000 3,000 5 -2,000 2,000 Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%? b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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3) Consider the two mutually exclusive projects in table below: Project's Cash Flow n B1 B2 Cash Flow Salvage Value Cash Flow Salvage Value 0 -$20,000 -$17,000 1 -2,000 10,000 -2,500 9,000 2 -2,000 8,000 -2,500 6,000 3 -2,000 5,000 -2,500 3,000 4 -2,000 3,000 5 -2,000 2,000 Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%? b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?
Transcribed Image Text:3) Consider the two mutually exclusive projects in table below: Project's Cash Flow n B1 B2 Cash Flow Salvage Value Cash Flow Salvage Value 0 -$20,000 -$17,000 1 -2,000 10,000 -2,500 9,000 2 -2,000 8,000 -2,500 6,000 3 -2,000 5,000 -2,500 3,000 4 -2,000 3,000 5 -2,000 2,000 Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%? b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?
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