Year EndCash FlowAlternative AAlternative B0-1,00060016005002600-2,000360040046002005-2,100-1,00067001,386 a) Solve for the Net Present Value of the alternatives A and B using interest rates from 0% upward.b) Plot the curves on the resulting net present values against interest rates.c) What are the rates of return of the two alternatives?d) What is the rate of return on the difference between the alternatives?e) If your MARR is 8 percent, which alternatives would you select? Comment briefly on your results. What are some problems associated with the ROR method?f) Assume the negative cash flows are costs and the positive ones are benefits. What are the Benefit Cost ratios over the analysis period?This problem requires many iterations. Use interest tables and/or write a computer program to solve it.

Net present values refers to the discounted values of the future cash flow .

Answered: a) Solve for the Net Present Value of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Year End	Cash Flow
Alternative A	Alternative B
0	-1,000	600
1	600	500
2	600	-2,000
3	600	400
4	600	200
5	-2,100	-1,000
6	700	1,386

a) Solve for the Net Present Value of the alternatives A and B using interest rates from 0% upward.
b) Plot the curves on the resulting net present values against interest rates.
c) What are the rates of return of the two alternatives?
d) What is the rate of return on the difference between the alternatives?
e) If your MARR is 8 percent, which alternatives would you select? Comment briefly on your results. What are some problems associated with the ROR method?
f) Assume the negative cash flows are costs and the positive ones are benefits. What are the Benefit Cost ratios over the analysis period?

This problem requires many iterations. Use interest tables and/or write a computer program to solve it.

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