i. Alternative to be selected if interest rate is 6%.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

To determine

ii.

Best alternative is selected.

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

• 3 different people working at any companies under the BPO industry in the Philippines. • What are the 3 different Vision, Mission, Duties and Responsibilities and Career Path of these people in their companies under the BPO industry?

Module 6 ⚫(1902) Buckner C X | (1902) How to d x (1902) Buckner F X (1902) Productic X WP Videoplayer Canvas Login | Ir x | + Σ R mybrcc.instructure.com/courses/417310/discussion_topics/3420114?module_item_id=20155705 Spring 2025 Home Announcements Modules Syllabus Grades 8 People BRCC-_Library DLASC Module 6 Discussion - Business Costs Relaunch to update For this discussion, think about where you work or a business you have a significant amount of knowledge about. What is a common product that the business sells? What are the main costs the business has to incur in order to be able to sell that product? Which of these costs are fixed and which are variable? How much additional costs would be incurred if it were to sell one additional unit of that product (marginal cost)? Write a discussion thread about this business, the product it commonly sells, and your answers to the above questions. Also, respond to at least two threads created by your classmates. In these responses, share what…

Refer to the video to answer the following: • what are all the key policies or all the strategies the Philippine government should prioritize to accelerate sustainable economic growth? • these should consider the Philippines current economic challenges, including inflation, unemployment, and the need for digital transformation. "The Philippines' Strong Economic Growth" (YouTube link: https://youtu.be/1YtEoGp2ZeM?siJQfIv5kbu0txVsLL.)

Answer 2

Question

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

To determine

ii.

Best alternative is selected.

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

To determine

ii.

Best alternative is selected.

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

To determine

ii.

Best alternative is selected.

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

To determine

ii.

Best alternative is selected.

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Answer 6

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

Answer 7

Chapter 5, Problem 69P

To determine

i.

Alternative to be selected if interest rate is 6%.

Answer 8

Expert Solution

Answer to Problem 69P

Alternative A is the correct answer.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Interest Rate is 6%

	A	B	C
Installed Cost	$10,000	$15,000	$20,000
Annual Benefit	1,625	1,530	1,890
Useful Life(yrs)	10	20	20

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Using the present worth analysis, the best alternative is alternative A as the present worth of alternative A is highest among three options.

Thus alternative A is the correct answer.

Answer 13

To determine

ii.

Best alternative is selected.

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Answer 14

To determine

ii.

Best alternative is selected.

Answer 15

Expert Solution

Answer to Problem 69P

Alternative A is selected.

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given:

Interest Rate is 3%.

Concept used:

RATE OF RETURN: It is a return which usually an investor gets on speculation. Investment can be done on shares, bonds etc. If rate of return is calculated for a fiscal year, then it is termed as annual rate of return.

Calculation:

Net Present worth analysis of Option- A

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)−F(P/F,i,n) ........(1)

Here,

P is the initial cost of the alternative ($10000)

A is the uniform annual benefit ($1625)

F₁is additional investment required in replacement ($10000) (in year- 10)

I is the interest rate (6%)

Substitute the values in above formula:

PW

= −$10000+$1625(P/A,6%,20)−$10000(P/F,6%,10)= −$10000+$1625(11.470)−$10000(0.5584)=−$10000+$18638.75−$5584=$3054.75

Thus, the present worth of the option A is $3054.75

Net present Worth Analysis of option B

Formula used to calculate the Present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($15000)

A is the uniform annual benefit ($1530)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

= −$15000+$1530(P/A,6%,20)= −$15000+$1530(11.470)=−$15000+$17549.10=$2549.10

Thus, the present worth of the option B is $2549.10

Net Present Worth Analysis of option C

Formula used to calculate the present worth is given below:

PW = −P+A(P/A,i,n)

Here,

P is the initial cost of the alternative ($20000)

A is the uniform annual benefit ($1890)

i is the interest rate (6%)

n is the time period (20 years)

Substitute the values in above formula

PW =

=−$20000+$1890(P/A,6%,20)=−$20000+$21678.30=$1678.30

Thus, the present worth of the analysis C is $1678.30.

Conclusion:

Alternative A is selected.

Answer 20

Ch. 5 - Prob. 1QTC Ch. 5 - Prob. 2QTC Ch. 5 - Prob. 3QTC Ch. 5 - Prob. 1P Ch. 5 - Prob. 2P Ch. 5 - Prob. 3P Ch. 5 - Prob. 4P Ch. 5 - Prob. 5P Ch. 5 - Prob. 6P Ch. 5 - Prob. 7P

i. Alternative to be selected if interest rate is 6%.

Videos

i.

Alternative to be selected if interest rate is 6%.

Answer to Problem 69P

Explanation of Solution

ii.

Best alternative is selected.

Answer to Problem 69P

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

i. Alternative to be selected if interest rate is 6%.

Videos

i. Alternative to be selected if interest rate is 6%.

Answer to Problem 69P

Explanation of Solution

ii. Best alternative is selected.

Answer to Problem 69P

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions

i.

Alternative to be selected if interest rate is 6%.

ii.

Best alternative is selected.