Explanation Table -1 shows the cash flow of different projects. Table -1 Projects X Y First cost (C) -146,000 -220,000 Operating cost (MO) per year -15,000 -10,000 Annual revenue ® per year 80,000 75,000 Salvage value (SV) 10,000 25,000 Time period (n) 3 6 Here, interest rate (i) is 10%. The time period for project X should be equated with project Y’s time period. Thus, all the cash flows are repeated for other 3 years. The time period 1 (n) is 6 years, and the time period 2 (n1) is 3 years. The future worth of project X (PW) can be calculated as follows: PW = ( C + ( R + MO ) ( ( 1 + i ) n1 − 1 i ( 1 + i ) n1 ) + SV + C ( 1 + i ) n2 + SV ( 1 + i ) n1 ) ( 1 + i ) n1 = ( − 146 ,000 + ( 80,000 − 15,000 ) ( ( 1 + 0 .1 ) 6 − 1 0.1 ( 1 + 0 .1 ) 6 ) + 10,000 − 146,000 ( 1 + 0.1 ) 3 + 10,000 ( 1 + 0.1 ) 6 ) ( 1 + 0

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Chapter 5, Problem 54APQ

To determine

Calculate the future worth.

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Chapter 5 Solutions

ENGINEERING ECONOMY DIGITAL ACCESS

Ch. 5 - Prob. 1P Ch. 5 - Prob. 2P Ch. 5 - Prob. 3P Ch. 5 - Prob. 4P Ch. 5 - Prob. 5P Ch. 5 - What is meant by the term equal service...Ch. 5 - Prob. 7P Ch. 5 - Prob. 8P Ch. 5 - Prob. 9P Ch. 5 - Prob. 10P

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