MARK (per year a. What is the AW for each of the three estimation conditions? b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates for these two factors, assuming all other factors to be at their most likely values.
MARK (per year a. What is the AW for each of the three estimation conditions? b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates for these two factors, assuming all other factors to be at their most likely values.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose that, for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table.
Optimistic
$90,000
11 years
$30,000
$36,000
12%
Most Likely
$100,000
7 years
$20,000
$27,000
12%
Capital investment
Useful life
Market value
Net annual cash flow
MARR (per year)
Pessimistic
$122,000
5 years
$0
$18,000
12%
a. What is the AW for each of the three estimation conditions?
b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates for these two factors, assuming all other factors to be at
their most likely values.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.
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