(a)
Calculate the
(a)

Explanation of Solution
Investment is (I) is $650,000. Equivalent annual revenue (A) is $105,000. Salvage value (SV) is 50,000. Time period (n) is 5.
Rate of return (i) can be calculated as follows:
The normal revenue is $575,000
When the rate of return as -3% is substituted, the calculated value is less than the investment and thus, the rate of return is reduced to 3.742%.
The calculated value is nearly equal to investment with rate of return 3.742%. Thus, it is confirmed that the rate of return is 3.742%.
(b)
Calculate the equivalent annual value.
(b)

Explanation of Solution
Investment is (I) is $650,000. Salvage value (SV) is 50,000. Time period (n) is 5. Rate of return (i) is 15%.
Equivalent annual value (A) can be calculated as follows:
The equivalent annual value is $186,489.61.
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Chapter 7 Solutions
ENGINEERING ECONOMY DIGITAL ACCESS
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- Many health economists believe that the United States spends its MARGINAL dollars on healthcare in a highly wasteful manner. This view is also known as “flat of the curve” medicine. True Falsearrow_forwardIncreasing provision of out-of-pocket cost calculators by major insurers are attempts to REDUCE price transparency for consumers True Falsearrow_forwardA price hike for medical goods/services that have an inelastic (i.e., <1) own-price elasticity of demand will tend to yield lower revenues True Falsearrow_forward
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