An engineer in charge of the design of a plant must choose either a batch or a continuous system. The batch system offers a lower initial outlay but, owing to higher labor requirements, exhibits a higher operating cost. The cash flows relevant to this problem have been estimated as follows: Year Discounted Cash-Flow Net Present 1-10 Rate of Return Worth at 10% (Rate of Return or Interest) Batch System Continous System -$20 000 -$30 000 $5600 $7650 25% $14 400 $17 000 22% Check the values given for the discounted-cash-flow rate of return and net present worth. If the company requires a minimum rate of return of 10 percent, which system should be chosen?
An engineer in charge of the design of a plant must choose either a batch or a continuous system. The batch system offers a lower initial outlay but, owing to higher labor requirements, exhibits a higher operating cost. The cash flows relevant to this problem have been estimated as follows: Year Discounted Cash-Flow Net Present 1-10 Rate of Return Worth at 10% (Rate of Return or Interest) Batch System Continous System -$20 000 -$30 000 $5600 $7650 25% $14 400 $17 000 22% Check the values given for the discounted-cash-flow rate of return and net present worth. If the company requires a minimum rate of return of 10 percent, which system should be chosen?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:An engineer in charge of the design of a plant must choose either a batch or a
continuous system. The batch system offers a lower initial outlay but, owing to higher labor
requirements, exhibits a higher operating cost. The cash flows relevant to this problem have
been estimated as follows:
Year
Discounted Cash-Flow
Net Present
1-10
Rate of Return
Worth at 10%
Batch System
Continous System
-$20 000
-$30 000
(Rate of Return
or Interest)
$14 400
$17 000
$5600
$7650
25%
22%
Check the values given for the discounted-cash-flow rate of return and net present worth. If
the company requires a minimum rate of return of 10 percent, which system should be
chosen?
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