Engineering Economy
Engineering Economy
16th Edition
ISBN: 9780133582819
Author: Sullivan
Publisher: DGTL BNCOM
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Chapter 11, Problem 4P
To determine

Calculate the time periodt.

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A company is about to invest in a joint venture research and development project with another company. The project is expected to last nine years, but yearly payments the company makes will begin immediately (a payment is made today, and the last payment is nine years from today). Salaries will account for $50,000 of each payment. The reminder of each payment will cover equipment costs and facility overhead. The initial (immediate) equipment and facility cost is $50,000. Each subsequent year this figure will drop by $5000 until a cost of $25000 is reached, after which the costs will remain constant until the end of the project. a) Draw a cash flow diagram to illustrate the cash flows for this project. b) At an interest rate of 10%, what is the total future worth of all project payments at the end of the nine years?
You have agreed to make investment in your friends agricultural farm. This would require an amount of $20,000 as initial investment on your part. Your friend promises you revenue (before expenses) of $3600 per year the first year and thereafter the revenue increases by $200 per year. Your share of the estimated annual expenses is $1000. You are planning to invest for six years. Your friend has made the commitment to buyout your share of the business at that time for $24000. You have decided to set a personal MARR of 15% per year. Judge the profitability of the investment project by using Future Worth (FW) method.
In a college town, a friend of yours spent $100,000 on a small apartment building. She paid $10,000 out of her own pocket for the structure and obtained a $90,000 mortgage from a local bank. The annual bank mortgage payment is $10,500. Your friend also anticipates that annual building and grounds maintenance will cost $15,000. There are four apartments (two bedrooms each) in the building that can each be rented for $360 per month. Refer to the Engineering Economy and Design process, answer the following: a. Is there a problem with your friend? what is it, if so? b. What options does she have? (Please state at least three) c. Calculate the economic consequences and other necessary data for the alternatives in Part b. d. Choose a criterion for differentiating between alternatives and use it to advise your friend on which course path to take. e. Attempt to analyze and compare the alternatives in view of at least one criterion in addition to cost. f. what should your friend do based on the…
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