An investment of 105,815.40 can be made in a project that will produce a uniform annual revenue of 53,000 for 5 years and then have a salvage value of 30,000. Annual disbursements will be 30,000 each year for operation and maintenance costs. The company's minimum attractive rate of return is 10%. Show whether this is a desirable investment by using the AW, IRR, ERR, PI, Payback and B/C.

An investment of 105,815.40 can be made in a project that will produce a uniform annual revenue of 53,000 for 5 years and then have a salvage value of 30,000. Annual disbursements will be 30,000 each year for operation and maintenance costs. The company's minimum attractive rate of return is 10%. Show whether this is a desirable investment by using the AW, IRR, ERR, PI, Payback and B/C.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

PI= 1

IRR i%= 10% = M.A.R.R.

ERR i%= 10% = M.A.R.R.

PAYBACK Simple= 4.6 years and Discounted= 5 years

B/C Conventional= 1 and Modified= 1

2. An investment of 105,815.40 can be made in a project that will produce a uniform
annual revenue of 53,000 for 5 years and then have a salvage value of 30,000.
Annual disbursements will be 30,000 each year for operation and maintenance
costs. The company's minimum attractive rate of return is 10%. Show whether
this is a desirable investment by using the AW, IRR, ERR, PI,
Payback and B/C.
30,000
53,000
53,000 53,000 53,000T53,000
1.
30,000
2
30,000 30,000 30,000 30,000
4
5
105,815.40
MARR = 10%

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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