Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Chapter 16, Problem 15P
To determine
Selection of the alternate.
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The government is considering undertaking one of the four projects A1, A2, A3, and A4. These projects are mutually exclusive, and the estimated present values of their costs and of their benefits are shown in millions of dollars as follows:
All of the projects have the same duration. Assuming that there is no donothing alternative, which alternative would you select? Justify your choice by using a benefit-cost ratio on incremental investment (BC(i)).
The city of Oakmont is interested in developing some lake front property into a sports park (picnic facilities, boat docks, swimming area, etc.). A consultant has estimated that the city would need to invest $3 million in this project. In return, the developed property would return $500,000 per year to the city through increased
tax revenues and recreational benefits to the public. What would the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 4% per year.
E Click the icon to view the interest and annuity table for discrete compounding when i= 4% per year.
The life of the project needs to be at least
years in order to be cost-beneficial to the city. (Round up to the nearest whole number.)
Let PW(A) be the present worth of investment alternative A, PW(B) be the present worth of investment alternative B, B/C(A) be the benefit-cost ratio for investment alternative A, and B/C(B) be the benefitcost ratio for investment alternative B. If PW(A) > PW(B) > $0, which of the following answers is correct? a) B/C(A) > B/C(B); b) B/C(A) > B/C(B) > 1.0; c) B/C(A) > 1.0 and B/C(B) > 1.0; d) insufficient information available to answer
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Contemporary Engineering Economics (6th Edition)
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- Andy Mendoza makes handcrafted dolls, which he sells at craft fairs. He is considering mass-producing the dolls to sell in stores. He estimates that the initial investment for plant and equipment will be $15,000, while labor, materials, packaging, and shipping will be about $4 per doll. He has determined that monthly sales volume is related to price, according to the following equation: v = 1000 - 20p + (1000/p) Find the optimal price, the optimal volume, and the maximal profit per month with a relationship between volume and price.arrow_forwardYou are considering the following project: It pays you $2,500 at the end of the first year, costs $8,500 by the end of the second year and brings $6,800 a year after. What is the project's internal rate of return(s), exact external rate of return and the approximate external rate of return it current MARR is 14%?arrow_forwardThe city of Oakmont is interested in developing some lake front property into a sports park (picnic facilities, boat docks, swimming area, etc.). A consultant has estimated that the city would need to invest $3 million in this project. In return, the developed property would return $500,000 per year to the city through increased tax revenues and recreational benefits to the public. Whatwould the life of this project need to be in order to be cost-beneficial to the city? The interest rate on municipal bonds is 6% per year.arrow_forward
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