Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of these alternatives must be selected. The firm's MARR is 20% per year. The estimated cash flow for each alternative are as follows: Alternative A Alternative B Capital Investment $20,000 $30,000 Annual Expenses 4,000 2,000 Useful life (years) 5 10 Market Value (at end of useful life) $4,000 $6,000 Assume the study period is shortened to five years. The market value of alternative B after five years is estimated to be $12,000. Which alternative would you select using NPW-C? (Draw the cash flow diagram and solve).

Two mutually exclusive alternatives are being considered for the environmental protection equipment at a petroleum refinery. One of these alternatives must be selected. The firm's MARR is 20% per year. The estimated cash flow for each alternative are as follows: Alternative A Alternative B Capital Investment $20,000 $30,000 Annual Expenses 4,000 2,000 Useful life (years) 5 10 Market Value (at end of useful life) $4,000 $6,000 Assume the study period is shortened to five years. The market value of alternative B after five years is estimated to be $12,000. Which alternative would you select using NPW-C? (Draw the cash flow diagram and solve).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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