Tonny is currently evaluating two mutually exclusive projects. Both projects have a cost of capital of 12% and can be replicated indefinitely with the same cash flows. Calculate the EAA (Equivalent Annual Annuity) payment for just Project L. t = 0 1 Project S: ..... A. $34.12 B. $36.91 C. $38.74 D. $40.23 E. $42.87 t= 0 Project L: (8700) .. 1 6500 2 ----------| 2 2500 (8700) 6800 3 1400 3400

Tonny is currently evaluating two mutually exclusive projects. Both projects have a cost of capital of 12% and can be replicated indefinitely with the same cash flows. Calculate the EAA (Equivalent Annual Annuity) payment for just Project L. t = 0 1 Project S: ..... A. $34.12 B. $36.91 C. $38.74 D. $40.23 E. $42.87 t= 0 Project L: (8700) .. 1 6500 2 ----------| 2 2500 (8700) 6800 3 1400 3400

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the following two mutually exclusive projects being considered by an agency. The agency's MARR is 4% per year and the projects have a service life of 5 years Project 1 $14,300 $3,743 $2,363 Answer the following questions Initial cost Annual revenues Present Worth (PW) 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 dearest 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? OA. Yes B. No Project 2 $21.500 $5,399 $2,535 e. IMPORTANT Note from this example that a higher IRR for an individual…
MARR = 8%. Your consultancy business signs on with a new client. The client pays you $5000 up front as deposit toward future work. One year later the client makes another payment of $5000. The year after that you invest $16,000 into the project. The following year, in the third year, the client pays you the remaining balance of $5388. The project's precise ERR is within 0.5% of a) 12% b) 13% c) 4% d) 15% e) None of the above
PLEASE SHOW YOUR EXCEL FORMULASQUESTION: Consider two mutually exclusive investment alternatives given in the table below. Which project would be selected based on the rate of return decision (IRR) criterion? (Assume that MARR is 10%.). Hint: RIC Determine the MIRR on the incremental investment. Which project would be chosen at MARR = 10%? Provide your answer in a table with column headers N (year), A1 cash flow, A2 cash flow, A2-A1 cash flow. n Project A1 Cash Flow Project A2 Cash Flow 0 -$12,000 -$15,000 1 $7,500 $8,000 2 $7,500 $14,000 3 $7,500 $5,000 IRR 39.45% 38.27%
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If that 30% return on investment (ROI) occurs over a decade, r = .55 and n = 10, so the annualized rate of return is 0.0653 0.02658 0.0554 0.0201
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Please answer step by step with explanation.
Hint: You need to do the following three things; 1) PWC Old & PWC New 2) Incremental NPV 3) Incremental ROR
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