Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 12% per year. The decision-maker can select one ofthese alternatives or decide to select none of them. Make a recommendation based on the following methods.Design Ya. Based on PW method, Design is more economical.b. The modified B/C ratio of Design Y isThe modified B/C ration of Design Z isc. The incremental B/C ratio is (Round to two decimal places)Therefore, based on the B/C ratio method, DesignInvestment costAnnual revenueAnnual costUseful lifeSalvage value(Round to two decimal places)(Round to two decimal places)d. The discounted payback period of Design Y isThe discounted payback period of Design Z isNet PWisis more economicalyears (Round to one decimal place)years (Round to one decimal place)$140,000$51,725$9,67215 years$14,700$149,103Design Z$275,000$84,946$18,05915 years$33,000$186,587Therefore, based on the payback period method, Design would be preferred.(e) Why could the recommendations based on the payback period method be different from the other two methods?A. because the payback period method ignores the cash flows after the payback periodB. because the payback period gives more weight to the cash flows after the payback period

Net Present Worth (NPW), also known as Net Present Value (NPV), is a financial metric used in…

Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 12% per year. The decision-maker can select one these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y Design Z $140,000 $275,000 $51,725 $84,946 $9,672 $18,059 15 years $14,700 $149,103 Investment cost Annual revenue Annual cost Useful life Salvage value Net PW CU 15 years $33,000 $186,587

Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 12% per year. The decision-maker can select one these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y Design Z $140,000 $275,000 $51,725 $84,946 $9,672 $18,059 15 years $14,700 $149,103 Investment cost Annual revenue Annual cost Useful life Salvage value Net PW CU 15 years $33,000 $186,587

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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