(a):
Calculate the
(a):

Explanation of Solution
The initial investment (IN) is $750,000. Net income (NY) is $135,000 per year. Time period (n) is 10. MARR (i) is 12%.
The internal
Substitute ir as 0.12 by trial and error method in the above calculation.
The calculated value is less than the present value factor to the annual value. Thus, increase the ir value to 0.124.
Since the calculated value is equal to the present value factor to the annual value, the value of ir is confirmed as 12.4%.
The value PI can be calculated as follows:
The value of PI is 1.02.
The value PW can be calculated as follows:
The present wroth (PW) is $12,763.5.
(b):
The measures for which the project is economically justified.
(b):

Explanation of Solution
The internal rate of return is greater than MARR. PI is greater than 1 and the present worth is greater than 0. Thus, the project is economically justified by these three measures.
(c):
Calculate the breakeven rate of interest.
(c):

Explanation of Solution
The breakeven interest rate can be calculated using the following spreadsheet function:
= RATE(10,135000,-750000)
The above function gives the value of 12.4148%. Thus, the breakeven interest rate is 12.4148%.
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Chapter 12 Solutions
ENGR.ECONOMY CUSTOM FOR TAMU ISEN 667
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