The institute of Electronics and Communications Engineers of the Philippines (IECEP) is planning to put up its own building. Two proposals being considered are: A. The construction of the building now, to cost P500,000 B. The construction of a smaller building now, to cost P300,000 and at the end of 5 years, an extension to be added to cost P300,000 Which option is more cost-effective if the interest rate is 20% and depreciation is ignored, and by how much? Follow the format. 1. Given: 2. Formula: 3. Required: 4. Cash flow Sketch: 5. Solution:

The institute of Electronics and Communications Engineers of the Philippines (IECEP) is planning to put up its own building. Two proposals being considered are: A. The construction of the building now, to cost P500,000 B. The construction of a smaller building now, to cost P300,000 and at the end of 5 years, an extension to be added to cost P300,000 Which option is more cost-effective if the interest rate is 20% and depreciation is ignored, and by how much? Follow the format. 1. Given: 2. Formula: 3. Required: 4. Cash flow Sketch: 5. Solution:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: None

A: Calculate the present value of the uniform annual benefit for the useful life of 4 years:Calculate…

Q: A construction company must replace a piece of heavy earth-moving equipment. Cat and Volvo are the…

Q: Urban infrastructures that support a community are sometimes in the news; we seldom think about them…

A: DISCLAIMER “Since you have asked multiple questions, we will solve the first question for you. If…

Q: Use the equivalent uniform annual cost of the investment (EUAC), justify which of the following…

A: the Estimated Uniform Annual Cost (EUAC) method expresses life cycle costs as an annualized…

Q: In order to improve evacuation routes out of New Orleans in the event of another major disaster such…

A: Present value is the current value of future cash flows or payments. It is the discounted value of…

Q: the maintenance costs associated with an investment are 100,000,000 for the first 10 years and…

A: To calculate the present worth of the annual disbursement, we need to consider the two different…

Q: Lipsion Ltd company is thinking about investing in one of two potential new products for sale. The…

A: Payback period shows the recovery period of initial investment. It is calculated by using the…

Q: A subdivision developer must construct a sewage treatment plant and deposit sufficient money in a…

A: Perpetual payment (PP)=$5000 per yearTotal time of duration for replacement (T)=40 yearsCost of…

Q: Which projects are worth funding if the market interest rate is 8%? Project |Cash Cash inflows…

A: Here, four projects for investment is given with their inflow and outflow of cash and their…

Q: Each of the five alternatives has 20-year useful lives. If the MARR is 8%, use incremental rate of…

A: Given MARR is 8%. Alternative selection using Incremental rate of return analysis: First of all drop…

Q: Given the financial data for three alternatives Initial cost EUAB Life ROR A $600 82 10 years 6.1% O…

A: MARR stands for "Minimum Acceptable Rate of Return." In economics, it represents the lowest rate of…

Q: An engineering analysis by net present worth (NPW) is to be made for the purchase of two devices A…

A: Given; For firm A:- Cost= $600 Annual benefit= $100 Salvage value= $250 For firm B:- Cost= $700…

Q: A small manufacturing company is evaluating trucks for delivering their products. Truck A has a…

A: NPV is a method of capital budgeting that helps the investors in any company to determine if the…

Q: Operating costs are an important criteria when selecting what machinery would be the best choice for…

A: An investment's equivalent uniform annual worth is the equivalent annuity that corresponds to all of…

Q: n industrial firm is considering two alternatives for a project. Alternative A will cost $200,000…

A: A B Initial cost 2,00,000 1,80,000 Annual Cost 8000 8200 Overhaul exp 4000 time 10 10…

Q: c) The Selangor state government is seeking a proposal to take over the maintenance of dilapidated…

A: 1) 0+5.463+5.573/2.8+5.463+2.832)0+5.463+5.573/7.67

Q: Three estimators have estimated a project with a 10-year life. Estimate 1 Estimate 2 Estimate 3…

A: Computing present value includes assuming that a rate of return could be earned on the funds over…

Q: A new alloy can be produced by Process A, which costs $200,000 to implement. The operating cost will…

A: Interest rate=8% per year compounded quarterly means 2% per quarter Process A…

Q: For the below ME alternatives, which machine should be selected based on the PW analysis. MARR=10%.…

A: here we calculate the NPW of the all three Machine and choose the best machine so the calculation of…

Q: If the MARR is 15%, which alternative should be selected? Make your decision after comparing the…

A: NPV stands for Net Present Value, and it is a financial metric used to evaluate the profitability of…

Question

100%

The institute of Electronics and Communications Engineers of the Philippines (IECEP) is planning to put up
its own building. Two proposals being considered are:
A. The construction of the building now, to cost P500,000
B. The construction of a smaller building now, to cost P300,000 and at the end of 5 years, an extension to
be added to cost #300,000
Which option is more cost-effective if the interest rate is 20% and depreciation is ignored, and by how
much?
Follow the format.
1. Given:
2. Formula:
3. Required:
4. Cash flow Sketch:
5. Solution:

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Use Present Worth Analysis to determine whether Alternative A or B should be chosen. Items are identically replaced at the end of their useful lives. Assume an interest rate of 6% per year, compounded annually. Alternative A Alternative B Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 400 40 170 2 1,000 48 257 3 O Alternative A, because it costs $736.29 less than Alternative B, in terms of present worth Alternative B, because it costs $736.29 more than Alternative A, in terms of present worth Alternative A, because its present worth is positive Alternative B, because it only incurs the initial cost once every three years instead of every two years
a project’s initial cost of $220,000 is borrowed from a bank. The following net cashflow is expected in the first 5 years End of Year Net Cashflow $21,000 $42,000 -$11,500 $33,000 $17,500 The company’s MARR is 12%. Calculate in table the loan balance and project balance of each year? also find out the NFW and NPW of the project?
i need the answer quickly
Please don't use pen and paper type the answer step by step . thank you
Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold A B $28,000 $55,000 Capital Investment Annual Expenses Annual Revenues MV at EOY 10 Useful life ACapital Investment AMarket Value AAnnual Income (REV - EXP) Blank 1 15,000 AIRR 23,000 4 PW 6,000 8,000 10,000 10 years 10 years 10 years Use incremental analysis to determine the best alternative on the basis of PW method & IRR method. Is increment justified? 13,000 28,000 Blank 1 Blank 4 Blank 7 Blank 10 Blank 13% Blank 16 C $40,000 Blank 19 22,000 32,000 Blank 2 Blank 5 Blank 8 Blank 11 Blank 14% Blank 17 Blank 20 Blank 3 Blank 6 Blank 9 Blank 12 Blank 15% Blank 18 Blank 21
None
3. PEMEX, Mexico's petroleum corporation, has an estimated budget for oil and gas exploration that includes equipment for three offshore platforms as shown. Use the PW to select the best alternative at a MARR of 14% per year. Platform X Y Ꮓ Initial Cost, $ million 300 450 510 M&O, $ million per year 320 290 230 Salvage Value, $ million 75 50 90 Estimated Life, years 20 20 20
Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR = 15% per year. "Do Nothing" is not an option. A B C Capital investment $15,000 $16,000 $13,500 $18,100 Annual costs 260 290 450 110 Market value at EOY 10 900 1,350 1,700 2,050 FW (15%) - $65,062 - $69,267 ??? - $73,408
Please give a detailed solution to this problem. Do not use any software and just solve manually. Thank you.
3 If a project schedule is accelerated, it is possible to complete the project in B-months rather than A-months. This would allow the developer an additional profit of $X per month over the saved time. The cost of acceleration is an extra $Y per month over the B-months of construction. If the interest rate for interim financing is C%, should the project be accelerated? A= B= C= X= Y= PW of savings PW of costs 25 months 19 months 9% $17,700 $4,700 Should the project be accelerated? Try Again Try Again What is the break-even level of increased monthly costs? Try Again
A public-private initiative in Texas will significantly expand the wind-generated energy through- out the state. The cash flow for one phase of the project involving Central Point Energy, a trans- mission utility company, is shown. Given reinvestment rate of 14% per year for excess funds and 10 % per year for borrowing rate for extra funds, determine: given MARR = 12% Year Net cash flow 0. -50000 1 +22000 +38000 3. -2000 4 -1000 +5000 a) How many number of ROR values is expected and why? b) Calculate the external rate of return (MIRR). c) Is the project economically viable?
Given: Cash flows for an investment. Required: EUAC at 7% per year (i.e., Calculate EUAC). Year 1 2 3 Cash flow $1400 500 1600 $825.68 $725.68 $925.68 $625.68 4 5 1700 -2.000