Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 6, Problem 20P
(a):
To determine
Calculate the value of X.
(b):
To determine
Calculate the minimum value of X.
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Consider 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 40,000
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.
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 40,000
Chapter 6 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Consider the cash flows in Table P6.7 for the...Ch. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - The repeating cash flows for a certain project are...
Ch. 6 - Beginning next year, a foundation will support an...Ch. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 15PCh. 6 - Prob. 16PCh. 6 - Prob. 17PCh. 6 - Prob. 18PCh. 6 - The Geo-Star Manufacturing Company is considering...Ch. 6 - Prob. 20PCh. 6 - Prob. 21PCh. 6 - Prob. 22PCh. 6 - Prob. 23PCh. 6 - Prob. 24PCh. 6 - Prob. 25PCh. 6 - Prob. 26PCh. 6 - Prob. 27PCh. 6 - Prob. 28PCh. 6 - Prob. 29PCh. 6 - Prob. 30PCh. 6 - Prob. 31PCh. 6 - Prob. 32PCh. 6 - Prob. 33PCh. 6 - Prob. 34PCh. 6 - Prob. 35PCh. 6 - Prob. 36PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42PCh. 6 - Prob. 43PCh. 6 - Prob. 44PCh. 6 - Prob. 45PCh. 6 - Prob. 46PCh. 6 - Prob. 47PCh. 6 - Prob. 48PCh. 6 - Prob. 49PCh. 6 - Prob. 50PCh. 6 - Prob. 51PCh. 6 - Prob. 52PCh. 6 - Prob. 53PCh. 6 - Prob. 1STCh. 6 - Prob. 2STCh. 6 - Prob. 3STCh. 6 - Prob. 4ST
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