Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
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.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
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
Q10. The equation that will yield the external rate of return (ERR) of the following project is:
$25,000
$6,000
Investment Cost
Annual Receipts
Annual Expenses
Market Value
$7,000
Expected Life
5 years
E%
8%
A. 25,000 (F/P, i%, 5) = 7,000 + 6,000 (P/F, 8%, 5)
B. 25,000 (F/P, i%, 5) = 7,000 6,000 (P/A, 8%, 5)
C. 25,000 (F/P, i%, 5) = 7,000 + 6,000 (F/A, 8%, 5)
D. 25,000 (P/F, i%, 5) = 7,000 - 6,000 (F/A, 8%, 5)
E. None
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
Knowledge Booster
Similar questions
- Consider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment Revenues P 180,000 P 350,000 per year Expenses P 400,000 per year for the first 3 years, decreasing by P 50,000 per year thereafter a. Calculate the Internal Rate of Return (IRR) of each project. b. Calculate the External Rate of Return (ERR) of each project. Salvage Value P 40,000arrow_forwardThere are four steps for the selection of capital investment projects 1) Generate alternative capital investment project proposals. 2) Estimate cash flows for each project proposal. 3) Evaluate and choose which investment project to undertake 4) When completed review the investment project to see which assumptions about the project were correct What is the point of looking at the assumptions made after the investment was completed? Would it be better if the review was undertaken at earlier intervals, such as the mid-way point or sooner?arrow_forwardWhat do you know about the mathematical value of the internal rate of return of a project under each of the following conditions? a. The annual worth of the project is greater than zero. b. The annual worth of the project is equal to zero. c. The annual worth of the project is less than zero.arrow_forward
- (c) If A and B are mutually exclusive projects, which project would you select based on the rate of return on incremental investment at MARR = 10%? The rate of return on the incremental investment is %. (Round to one decimal place.) Which project would you select based on the rate of return on incremental investment at MARR = 10%? Choose the correct answer below. Project A O Project B 1: More Info FOT23 n 0 1 Net Cash Flow Project A - $145,000 35,000 35,000 140,000 Project B - $130,000 25,000 25,000 150,000arrow_forwardSuppose that, for a certain potential investment project, the optimistic, most likely, and pessimistic estimates are as shown in the accompanying table. Optimistic $90,000 11 years $30,000 $36,000 12% Most Likely $100,000 7 years $20,000 $27,000 12% Capital investment Useful life Market value Net annual cash flow MARR (per year) Pessimistic $122,000 5 years $0 $18,000 12% a. What is the AW for each of the three estimation conditions? b. It is thought that the most critical factors are useful life and net annual cash flow. Develop a table showing the net AW for all combinations of the estimates for these two factors, assuming all other factors to be at their most likely values. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.arrow_forwardJohn wants to invest $1 000 000. He has two options. The first option is to buy government bonds that earn 4% annually. The second option is to buy an apartment building that brings him $100 000 per year in revenues. Compare the two options in terms of their internal rates of return. (Your answer in the answer box should be either 1 or 2). Calculations should be provided.arrow_forward
- The data below are estimated for a project study. i = 10% Plan A Initial Investment P 35,000 Annual Operating Cost P 6,450 Life 4 years Salvage Value none Annual Revenue 19,000 Plan B Initial Investment P 50,000 Annual Revenue P 25,000 Annual Disbursement P 13830arrow_forwardHere are the data for an asset that is being considered: Initial cost=$35,000 Salvage value at 5 years=$5000 Rebuild cost at 3 years=$25,000 Annual net cash flow=$22,000 per year What is the ROR for this asset? (You can use the excel function "IRR" for this problem) a)53.0% b)41.0% c)43.9% d)42.8%arrow_forwardQ2arrow_forward
- 10arrow_forwardFisher Publishing Inc. is doing a financial feasibility analysis for a new book. Editing and preproduction costs are estimated at $45,000. The printing costs are a flat $7000 for setup plus $8.00 per book. The author's royalty is 8% of the publisher's selling price to bookstores. Advertising and promotion costs are budgeted at $8000. a. If the price to bookstores is set at $35, how many books must be sold to break even? (Round the answer up to the nearest whole number.) b. The marketing department is forecasting sales of 4800 books at the $35 price. What will be the net income from the project at this volume of sales?arrow_forwardCafe x is selling coffee in three different sizes at the prices and costs shown in the first table below. As shown in the second table, they are considering raising the price of their small margin based on the estimated changes in cups sold. You may find it helpful to use a spreadsheet for the calculations. Current Prices Increased Price for Small Coffee Cafe X is selling coffee in three different sizes at the prices and costs shown in the first table below. As shown in the second table, they are considering raising the price of their small to $2.75, and they project that sales of smalls will go down while sales of mediums and larges will go up slightly. Fill out the tables below to calculate the projected change in gross margin based on the estimated changes in cups sold. You may find it helpful to use a spreadsheet for the calculations. Current Prices Price per Cup Cost per Cup Cups Sold Small $2.50 50.20 2,500 Medium $3.50 50.35 1,400 $0 Revenue $ 0 $ 0 Large $4.50 50.50 700 0 $ 0…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning