
Calculate the

Explanation of Solution
The first cost (FC) is $400,000. Annual operating cost (AC) is $75,000. Annual savings (AS) is $192,000. Salvage value (SV) is 20% of the first cost. Profitability index (i) is 12%. Time period (n) is 5 years.
The internal
Substitute ir as 0.12 by trial and error method in the above calculation.
The calculated value is less than the first cost. Thus, increase the ir value to 0.1809.
Since the calculated value is equal to the first cost, the value of ir is confirmed as 18.09%.
The value PI can be calculated as follows:
The value of PI is 1.17.
The value PW can be calculated as follows:
The present wroth (PW) is $67,156.82.
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Chapter 12 Solutions
Engineering Economy
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