Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
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Question
Chapter 7, Problem 42P
To determine
Selection of the project.
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Q2
Five alternatives are being evaluated by the incremental rate of return method.
Initial investment Overall ROR
(TL)
Alternative
Incremental ROR
(%)
(%)
B
E
-23.000
9.6
12.3
8.2
23.3
31.1
-37.000
12.2
5.2
23.5
22.4
-42.000
17.4
6.5
27.3
D
-50.000
14.4
9.8
E
-75.000
25.7
If the projects are mutually exclusive and the MARR is 13% per year, what is the best alternative?
O a. B
O b.C
O c.D
Od.E
e. A
Q3)
For a 12% per year MARR, consider the following two investment projects:
Project A
Project B
Year
Net Cash Flow, BD
Net Cash Flow, BD
-2000
-3000
1
1000
1100
2
700
1900
3
1000
1100
4
700
Determine the following:
a) Based on Rate of Return analysis (IRR), which project would you select? Why?
b) Based on Simple Payback analysis (np), which project would you select? Why?
c) Which analysis method is better to use in engineering analysis? Why?
Chapter 7 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6PCh. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10P
Ch. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Consider an investment project with the cash flows...Ch. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Consider the investment projects given in Table...Ch. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 7 - Prob. 26PCh. 7 - Prob. 27PCh. 7 - Prob. 28PCh. 7 - Prob. 29PCh. 7 - Prob. 30PCh. 7 - Prob. 31PCh. 7 - Prob. 32PCh. 7 - Prob. 33PCh. 7 - Prob. 34PCh. 7 - Prob. 35PCh. 7 - Prob. 36PCh. 7 - Prob. 37PCh. 7 - Prob. 38PCh. 7 - Prob. 39PCh. 7 - Prob. 40PCh. 7 - Prob. 41PCh. 7 - Prob. 42PCh. 7 - Consider the two mutually exclusive investment...Ch. 7 - You are considering two types of automobiles....Ch. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Fulton National Hospital is reviewing ways of...Ch. 7 - Prob. 48PCh. 7 - Consider the investment projects given in Table...Ch. 7 - Prob. 50PCh. 7 - Prob. 51PCh. 7 - Prob. 52PCh. 7 - Prob. 53PCh. 7 - Prob. 54PCh. 7 - Prob. 55PCh. 7 - Prob. 56PCh. 7 - Prob. 57PCh. 7 - Prob. 1STCh. 7 - Prob. 2STCh. 7 - Prob. 3STCh. 7 - Prob. 4STCh. 7 - Prob. 5ST
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Similar questions
- Ali is a Planning engineer considered the following three mutually exclusive investment projects (A, B, and C) at PTUK. He summarized the relevant data provided for these projects as; for project A, the initial investment is -200 , annual return is 22 and the salvage value is 200. For project B, the initial investment is -4000, salvage value is 2600 and the annual return is 620. For project C, the initial investment is -5450, annual retum is 740 and salvage value is 4300. The useful life for these projects is similar which is 5 years, and MARR=10% . Which alternatives are feasible based on their ROR.arrow_forwardanswer fastarrow_forwardA firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4,231 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit. Identify seven combinations of project investments and a bank deposits which exhaust the budget. Which of the above combinations should the firm choose when the bank deposit rate is (i) 15% or (ii) 20%? Explain your answer and show your work. Suppose there is no option to deposit in the bank, but the projects are "divisible" (e.g. you may have 25% of project A). Which combination should the firm choose? Explain your answer and show your work. Use 15% as the deposit rate (discount rate).arrow_forward
- 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 40,000arrow_forwardHi! Help me with this please. Thank you so much! Based on basic methods of economy studies, a project is acceptable only when its AW, PW, or FW is greater than or equal to ______.arrow_forwardCan some one please help me to solve the following question. Please and thank youarrow_forward
- 10. Solve the given question and give the correct answer.arrow_forwardThe data below are estimated for a project study. i = 10% Plan A Initial Investment P 35,000 Annual Operating Cost P 6,450 Life 4 years Salvage Value none Annual Revenue 19,000 Plan B Initial Investment P 50,000 Annual Revenue P 25,000 Annual Disbursement P 13830arrow_forwardConsider the following two investment alternatives. Determine the range of investment costs for Alternative B (i.e., min. valuearrow_forwardPlease answer fast please arjent help please please answer it fast i will appreciate itarrow_forwardQuestion 1 A design firm is considering multiple independent projects for the upcoming quarter. For a MARR of 6.5% per quarter. What is your recommendation to the company based on a PW analysis? Project Initial Payment Monthly Costs (Today) A $1,500,000 $170,000 B $245,000 $200,000 C $300,000 $150,000 Payments are inflows for the design firm. Costs are outflows for the design firm. Payment at month 12 of $1,000,000 Costs at month 9 of $100,000 None Final Payment (At end of project) $3,000,000 Project Length Other Cash flows 2 years $3,000,000 18 months $4,000,000 30 monthsarrow_forwardQ4. The cash flow details of a public project is as follows = BD 250000 Initial cost /investment Annual benefits/revenues = BD 120000 Worth of annual cost Salvage value Interest rate per year 8% and useful lie 30 Years Use the three project evaluation methods( PW, FW, AW) = BD 12,000 = BD 150000arrow_forwardarrow_back_iosSEE MORE QUESTIONSarrow_forward_ios
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