Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 5, Problem 30P
(a):
To determine
Calculate the present worth.
(b):
To determine
Calculate the project balance.
(c):
To determine
Calculate the future worth.
(d):
To determine
Calculate the interest rate.
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A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4,231 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit.
Identify seven combinations of project investments and a bank deposits which exhaust the budget.
Which of the above combinations should the firm choose when the bank deposit rate is (i) 15% or (ii) 20%? Explain your answer and show your work.
Suppose there is no option to deposit in the bank, but the projects are "divisible" (e.g. you may have 25% of project A). Which combination should the firm choose? Explain your answer and show your work. Use 15% as the deposit rate (discount rate).
Which of the five project net cashflows presented in the table below would be considered a Conventional cashflow?
Note: This is a Multiple Answer question. Please select all of the following options you think are correct?
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Project 1
-50,000
30,000
15,000
5,000
3,000
7,000
13,000
Project 2
-50,000
-10,000
50,000
70,000
3,000
-2,000
-5,000
Project 3
-100,000
-20,000
50,000
80,000
120,000
Project 4
-70,000
-30,000
20,000
70,000
-10,000
5,000
20,000
Project 5
-80,000
-40,000
-35,000
23,000
47,000
43,000
19,000
O Project 4
O Project 2
O Project 5
Project 1
Project 3
If mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV) and internal rate of return (IRR) methods
always
agree.
Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows.
Year
Project Y Project Z
0
-$1,500
-$1,500
1
$200
$900
2
$400
$600
3
$600
$300
4
$1,000
$200
NPV (Dollars)
800
600
Project Y
400
Project Z
200
-200
0246
8
10 12 14 16 18 20
COST OF CAPITAL (Percent)
If the weighted average cost of capital (WACC) for each project is 14%, do the NPV and IRR methods agree or conflict?
O The methods agree.
O The methods conflict.
Chapter 5 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - If a project costs 100,000 and is expected to...Ch. 5 - Refer to Problem 5.2, and answer the following...Ch. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Consider the cash flows from an investment...Ch. 5 - Prob. 10P
Ch. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Consider the project balances in Table P5.19 for a...Ch. 5 - Your RD group has developed and tested a computer...Ch. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Geo-Star Manufacturing Company is considering a...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Two methods of carrying away surface runoff water...Ch. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - Prob. 46PCh. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - Prob. 57PCh. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - Prob. 1STCh. 5 - Prob. 2ST
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