A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $500 each year until year 10; savings of $20,000 per year (EOY 1-10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm's MARR is 10% per year, a) what is the present worth of the project? PW = $Blank 1 b) What is the Future Worth of this project? FW = $Blank 2 c) What is IRR? IRR = Blank 3 %
A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000; maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $500 each year until year 10; savings of $20,000 per year (EOY 1-10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm's MARR is 10% per year, a) what is the present worth of the project? PW = $Blank 1 b) What is the Future Worth of this project? FW = $Blank 2 c) What is IRR? IRR = Blank 3 %
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Complete solutions including the correct cash flow diagram and your conclusion.
Note: For Equivalent Worth, round off your final answer to whole number. For
Transcribed Image Text:A project your firm is considering for implementation has these estimated costs and revenues: an investment cost of $50,000;
maintenance costs that start at $5,000 at the end of year (EOY) 1 and increase by $500 each year until year 10; savings of $20,000
per year (EOY 1-10); and finally a resale value of $35,000 at the EOY 10. If the project has a 10-year life and the firm's MARR is 10%
per year,
a) what is the present worth of the project? PW = $Blank 1
b) What is the Future Worth of this project? FW = $Blank 2
c) What is IRR? IRR = Blank 3 %
d) Is it a sound investment opportunity? YES or NO Blank 4
e) Determine the Discounted Payback? Blank 5 years
Note: For Equivalent Worth, round off your final answer to whole number. For Rate of Return, round
off to two decimal places (in percentage).
Blank 1 Add your answer
Blank 2 Add your answer
Blank 3 Add your answer
Blank 4 Add your answer
Blank 5
Add your answer
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