Compute the AW (annual worth) of The Bella. Remember to include your calculations in your supporting work.Round your answer to the nearest dollar. Four alternative designs are being considered for a pet-exercising treadmillI. The company's MARR is 18%. The cash flows associated with each are givenin the following table.The JudasThe LancelotThe BellaThe Lilo$120,000$50,000$130,000$141,000$50,000$13,000$18,000Capital Investment$160,000Annual RevenuesAnnual Expenses$50,000$50,000$20,000$15,000$14,000$15,000$15,000Refurbish at EOY 5$23,000$4,000$23,000$4,000Market Value after 10 years$5,000IRR???21.8%21.6%17.7%

To find the AW of Bella we take following steps : First we formulate Net cash flow : Year 0 : - ( Initial Investment ) Year 0 to 4 & year 6 to 9 : : Annual Revenue - Annual Expense Year 5 : Annual Revenue - Annual Expense - Refurbishment Cost year 10 : Annual Revenue - Annual Expense + Salvage Value 2 . We compute the present value of net cash flows : PW = ∑Net Cash flow (1+ MARR)nn = 010 3 .) Then we compute annual worth of this present value : AW = PW *1 -(1+MARR)-nMARRWe get , PW = 18368 & AW = 4,087

Business

Economics

The Judas The Lancelot The Bella The Lilo Capital Investment Annual Revenues |Annual Expenses $120,000 $160,000 $130,000 $50,000 $141,000 $50,000 $50,000 $50,000 $15,000 $23,000 $4,000 $20,000 $13,000 $18,000 $5,000 $14,000 $15,000 Refurbish at EOY 5 $23,000 $4,000 Market Value after 10 years $15,000 IRR ??? 21.8% 21.6% 17.7%

The Judas The Lancelot The Bella The Lilo Capital Investment Annual Revenues |Annual Expenses $120,000 $160,000 $130,000 $50,000 $141,000 $50,000 $50,000 $50,000 $15,000 $23,000 $4,000 $20,000 $13,000 $18,000 $5,000 $14,000 $15,000 Refurbish at EOY 5 $23,000 $4,000 Market Value after 10 years $15,000 IRR ??? 21.8% 21.6% 17.7%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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