Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 5, Problem 53P
(a):
To determine
Calculate the present worth.
(b):
To determine
Calculate the value of X.
(c):
To determine
Calculate the project balance.
(d):
To determine
Selection of he project.
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Students have asked these similar questions
Another method to deal with the unequal life problem of projects is the equivalent annual annuity (EAA) method. In this method the annual cash flows
under the alternative investments are converted into a constant cash flow stream whose NPV is equivalent to the NPV of the comparative project's
Initial stream.
Consider the case of Three Waters Boatbuilders:
Three Waters Boatbuilders is considering a three-year project that has a weighted average cost of capital of 10% and a net present
value (NPV) of $85,647. Three Waters Boatbuilders can replicate this project indefinitely.
The equivalent annual annuity (EAA) for this project is
The EAA approach to evaluating projects with unequal lives does not
do a good job of taking inflation into account.
Three investments are being studied by Bright Star Construction Limited. The table below provides the
estimated cash flow for each of the three investments over the next five years. Due to budget constraints,
Bright Star can only select one investment out of the three investments. At a MARR (Minimum Acceptable
Rate of Return) of 12%, answer the following.
Investment
1
2
3
a)
b)
Initial Cost
$9,000,000
$5,000,000
$7,000,000
Expenses per Year
$3,000,000
$1,500,000
$2,000,000
Return at end of year 5
$38,000,000
$20,000,000
$29,000,000
Use a rate of return method to determine the economically best investment for Bright Star.
Are you expecting different results if the comparison is based on Annual Worth? (Hint: no calculations
are needed).
c)
What are the case(s) in which a rate of return method is recommended?
d) Is it always necessary for the alternative with the highest rate of return to be the best alternative?
Please answer in short and ASAP
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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