**Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR is 5% per year and the projects have a service life of 5 years.**| | Project 1 | Project 2 ||---|---|---|| Initial cost | $14,200 | $21,700 || Annual revenues | $3,832 | $5,608 || Present Worth (PW) | $2,391 | $2,580 |**Answer the following questions.**---**a. Based on the PW, the project that is more economical is Project __ (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 __ is more economical.**d. Do the two methods produce the same recommendation for the most economical project?**- A. No- B. Yes

Cash flow:The sum of the total money is represented in the diagram. It represents the magnitude and…

Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR is 5% per year and the projects have a service life of 5 years. Initial cost Annual revenues Present Worth (PW) Answer the following questions. The IRR of Project 1 is The IRR of Project 2 is Project 1 $14,200 $3,832 A. No B. Yes $2,391 Project 2 $21,700 $5,608 a. Based on the PW, the project that is more economical is Project (Enter the project number). b. Calculate the IRR of each alternative (use the trial-and-error method) $2,580 % (Round to the nearest one decimal place) % (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 is more economical. d. Do the two methods produce the same recomendation for the most economical project?

Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR is 5% per year and the projects have a service life of 5 years. Initial cost Annual revenues Present Worth (PW) Answer the following questions. The IRR of Project 1 is The IRR of Project 2 is Project 1 $14,200 $3,832 A. No B. Yes $2,391 Project 2 $21,700 $5,608 a. Based on the PW, the project that is more economical is Project (Enter the project number). b. Calculate the IRR of each alternative (use the trial-and-error method) $2,580 % (Round to the nearest one decimal place) % (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 is more economical. d. Do the two methods produce the same recomendation for the most economical project?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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