Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR 6% per year and the projects have a service life of 5 years. Initial cost Annual revenues Present Worth (PW) Answer the following questions. Project 1 $14,200 $3,832 $1,942 Project 2 $21,700 $5,637 $2,045 a. Based on the PW, the project that is more economical is Project 2 (Enter the project number). b. Calculate the IRR of each alternative (use the trial-and-error method) The IRR of Project 1 is% (Round to the nearest one decimal place) The IRR of Project 2 is % (Round to the nearest one decimal place) c. Perform the incremental IRR analysis to determine the project that is more economical: Incremental IRR =% (Round to the nearest one decimal place); Therefore, based on the incremental IRR, Project 2 is more economical.

Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR 6% per year and the projects have a service life of 5 years. Initial cost Annual revenues Present Worth (PW) Answer the following questions. Project 1 $14,200 $3,832 $1,942 Project 2 $21,700 $5,637 $2,045 a. Based on the PW, the project that is more economical is Project 2 (Enter the project number). b. Calculate the IRR of each alternative (use the trial-and-error method) The IRR of Project 1 is% (Round to the nearest one decimal place) The IRR of Project 2 is % (Round to the nearest one decimal place) c. Perform the incremental IRR analysis to determine the project that is more economical: Incremental IRR =% (Round to the nearest one decimal place); Therefore, based on the incremental IRR, Project 2 is more economical.

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

Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR is
6% per year and the projects have a service life of 5 years.
Initial cost
Annual revenues
Present Worth (PW)
Answer the following questions.
Project 1
$14,200
$3,832
$1,942
Project 2
$21,700
$5,637
$2,045
a. Based on the PW, the project that is more economical is Project 2 (Enter the project number).
b. Calculate the IRR of each alternative (use the trial-and-error method)
The IRR of Project 1 is % (Round to the nearest one decimal place)
The IRR of Project 2 is% (Round to the nearest one decimal place)
c. Perform the incremental IRR analysis to determine the project that is more economical:
Incremental IRR =% (Round to the nearest one decimal place);
Therefore, based on the incremental IRR, Project 2 is more economical.

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