Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 13, Problem 24P
To determine
Willing to pay amount.
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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?
5.2 Revision Exercise 2
Nando's
Nando's is considering releasing a new peri-peri product. Option 1
is a peri-chicken pizza and Option 2 is a peri-chicken pie. The
financial manager at Nando's has prepared the following forecasts
for you.
Option 1
Cost of pizza ovens for all stores is R2 500 000;
Oven life (usefulness) is estimated at four years;
Increased cash flow profits from sales of pizzas in stores:
Year 1: R750 000;
Year 2: R850 000;
Year 3: R950 000;
Year 4: R1 050 000.
Today, you have $35,000 to invest. Two investment alternatives are available to you. One would require you to invest your $35,000 now; the other would require the $35,000 investment two
years from now. In either case, the investments will end five years from now. The cash flows for each alternative are provided below. Using a MARR of 13%, what should you do with the
$35,000 you have?
Click the icon to view the alternatives description.
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year.
The FW of the Alternative 1 is $ (Round to the nearest dollar.)
More Info
Year
OT N345
0
1
2
Alternative 1
- $35,000
$15,000
$15,000
$15,000
$13,000
$13,000
Alternative 2
$0
$0
- $35,000
$16,500
$16,500
$16,500
0
X
Chapter 13 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 13 - Prob. 1PCh. 13 - Prob. 2PCh. 13 - Prob. 3PCh. 13 - Prob. 4PCh. 13 - Prob. 5PCh. 13 - Prob. 6PCh. 13 - Prob. 7PCh. 13 - Prob. 8PCh. 13 - Prob. 9PCh. 13 - Prob. 10P
Ch. 13 - Prob. 11PCh. 13 - Prob. 12PCh. 13 - Prob. 13PCh. 13 - Prob. 14PCh. 13 - Prob. 15PCh. 13 - Prob. 16PCh. 13 - Prob. 17PCh. 13 - Prob. 18PCh. 13 - Prob. 19PCh. 13 - Prob. 20PCh. 13 - Prob. 21PCh. 13 - Prob. 22PCh. 13 - Prob. 23PCh. 13 - Prob. 24PCh. 13 - Prob. 25PCh. 13 - Prob. 1STCh. 13 - Prob. 2STCh. 13 - Prob. 3STCh. 13 - Prob. 4ST
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