Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 5, Problem 40P
(a):
To determine
Selection of the project.
(b):
To determine
Calculate the value of X.
(c):
To determine
Evaluation of the project D.
(d):
To determine
Selection of new project.
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Suppose we have four mutually exclusive projects, D1, D2, D3, and D4, whose internal rates of return on incremental investment between the projects is given as follows:IRR (Dl - D2) = 27.62%IRR {Dl - D3) = 14.26%IRR {Dl - D4) = 25.24%IRR (D3 - D2) = 30.24%IRR (D2- D4) = 17.34%IRR (D3 - D4) = 16.14%Which project should be selected at MARR 15%?
Consider two investments A and B with the sequences of cash flows given in the table below.
A) If A and B are mutually exclusive? projects, which project would you select based on the rate of return on incremental investment at
MARRequals=6?%?
The rate of return on the incremental investment is ?
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XYZ Gadget Company is currently considering which investment projects it should undertake. The following list of projects along with the
estimated rate of return of each project is presented to the executive management team:
Project A (8.5%)
Project B (7%)
Project C (6%)
Project D (11%)
Project E (5.5%)
The current interest rate in the loanable funds market is 5%. However, if an increase in government borrowing pushes the interest rate to
7.5%, we would expect the company to discontinue investment plans for all but,
of its planned projects.
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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- The construction of a bypass road needs a capital investment of $200,000 and $10,000 would be required each year for maintenance. The annual benefits to the project have been estimated to be $60,000. The study period(estimated life) of the project is 10 years. The MARR is set at 12%. a. What is the discounted payback period(in years)? b. Detemine whether this is a good investment using Modified Benefit-Cost Ratio method with Present Worth(PW). c. Using Conventional Benefit-Cost Ratio method with PW but the MARR is set at 12%, is this project acceptable?arrow_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_forwardConsider the two investments with the following sequences of cash flows Compute for i* for each investment What are the NPW of each alternatives with an MARR of 15% If A & B are mutually exclusive, which project is more economically desirable? (Incremental)arrow_forward
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