Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 5, Problem 6P
(a):
To determine
Calculate the time period to recover the investment.
(b):
To determine
Calculate the new time period to recover the investment.
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Students have asked these similar questions
A project has a service of five years with the initial investment outlay of$180,000. If the discounted payback period occurs at the end of project service life (say five years) at an interest rate of 8%, what can you say about the NFW of the project?
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.
Projects A and B are mutually exclusive. The minimum attractive rate of return (MARR) is 12%.
Using rate of return analysis, which project should be selected?
If the image fails to load here, go to https://www.dropbox.com/s/ld6wctqieu8jgwp/ROR.jpg >>
Year
0
A
B
- $750
- $1,150
B-A
- $400
123
$200
$300
$100
$200
$350
$150
$200
$400
$200
4
$600
$700
$100
ROR
17.68%
16.44%
13.69%
Project A
Project B
Both Project A and B
Select none of the project.
Insufficient information to make a decision.
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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- A new baseball stadium is being considered to be built in a metropolitan area by High Tech, Inc., at a cost of $50M. It is estimated that the annual maintenance cost will be $100K. The construction company recommends a major renovation every 50 years at a cost of $10M. If the corporation wants to set up a trust fund to pay for the stadium, its maintenance, and periodic renovations for an undefined number of years to come, what amount should be invested in the trust fund if the fun earns an annual interest rate of 6%? Group of answer choices $52,223,000 $60,566,667 $60,666,667 $73,500,429 $58,600,000arrow_forwardConsider the cashflow (n = 10 years, MARR = e = 14%) Cash Flow A Investment P 180,000 Revenues 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. Determine the Annual Worth (AW) of each project. b. Determine the Internal Rate of Return (IRR) of each project. c. Determine the External Rate of Return (ERR) of each project. Salvage Value P 40,000arrow_forwardDetermine the vahue of W for these two investment alternatives to be equivalent at an interest rate of 11% per year. Use at least four decimal places for every factor. X= $1000. 6 W 1.5 X 6789 10 11 12 13 14 15 16 5 10 10arrow_forward
- 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_forwardThe Mowbot company wants to add a new product line. This will require spending $750,000 on new equipment and tooling. The new product line is expected to sell 1,500 units per year for five years. Each unit will generate $180 in gross profit. At the end of five years, the equipment will be sold for an estimated salvage value of $120,000.The Mowbot company evaluates projects using a minimum rate of return (MARR) of 18%. Use present worth analysis to determine whether this is a viable project. Show the equivalence formula(s) you use as well as your final solution.arrow_forwardIf that 30% return on investment (ROI) occurs over a decade, r = .55 and n = 10, so the annualized rate of return is 0.0653 0.02658 0.0554 0.0201arrow_forward
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