You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated an annual revenue at the end of each year in the eight-year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = 12% per year, answer the following questions. 2a. What is the PW, AW, and FW of this proposal?
You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated an annual revenue at the end of each year in the eight-year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = 12% per year, answer the following questions. 2a. What is the PW, AW, and FW of this proposal?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Good day! I want you to answer only letter (2a).Note that PW, AW, and FW means (Present Worth)(Annual Worth) and (Future Worth)
This is how you answer the problem. Identify first the given. Next identify what is being ask in the problem.Third show me the Formula first before you plug-in the given into it ,i want to study and learn from your solution
Transcribed Image Text:ITEM 2:
You are faced with making a decision on a large capital investment proposal. The capital investment amount is
$640,000. Estimated an annual revenue at the end of each year in the eight-year study period is $180,000.
The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing
by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a
$20,000 market value at the end of year eight and a MARR = 12% per year, answer the following questions.
2a. What is the PW, AW, and FW of this proposal?
2b. What is the IRR, and ERR of this proposal?
2c. What is your conclusion about the acceptability of this proposal?
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