System 1 System 2 Capital investment Annual revenues $100,000 $150,000 70,000 50,000 Annual expenses 22,000 40,000 MV at end of useful life 20,000 Useful life 5 years 10 years IRR 16.5% 15.1%

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Potable water is in short supply in many countries. To address this need, two mutually exclusive water purification systems are being considered for implementation in China. Doing nothing is not an option. Refer to the data below and state your key assumptions in working this problem. Solve, a. Use thePWmethod to determine which system should be selected when MARR = 8% per year. b. Which system should be selected whenMARR = 15% per year?

System 1 System 2
Capital investment
Annual revenues
$100,000 $150,000
70,000
50,000
Annual expenses
22,000
40,000
MV at end of useful life
20,000
Useful life
5 years
10 years
IRR
16.5%
15.1%
Transcribed Image Text:System 1 System 2 Capital investment Annual revenues $100,000 $150,000 70,000 50,000 Annual expenses 22,000 40,000 MV at end of useful life 20,000 Useful life 5 years 10 years IRR 16.5% 15.1%
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