ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
Chapter 7, Problem 65P
To determine
i.
Present worth analysis.
Expert Solution
Answer to Problem 65P
As alternative B has the highest present worth, Alternative B is selected.
Explanation of Solution
Given:
Time: 10 years
Alternative A has a cost of $10000
Annual benefits of $4500
Alternative B costs $25000
Annual benefits of $8800.
Calculation:
Alternative A
The rates are discounted to the present value at 8%
Alternative B
Conclusion:
As alternative B has the highest present worth, Alternative B is selected.
To determine
ii.
Annual Cash Flow.
Expert Solution
Answer to Problem 65P
Alternative B has the highest cash flow.
Explanation of Solution
Given:
Time: 10 years
Alternative A has a cost of $10000
Annual benefits of $4500
Alternative B costs $25000
Annual benefits of $8800.
Calculation
Calculate annual cash flow as follows:
(EUAB-EAUC)B = 1664-6000(A/P,8%,5)
= 1664-6000(0.2505)
= 1664-1503
= $161.
Conclusion:
Alternative B has the highest cash flow.
Thus alternative B is selected.
To determine
ii.
Expert Solution
Answer to Problem 65P
Alternative A is selected.
Explanation of Solution
Given:
Two mutually exclusive alternatives are being considered. Both have lives of 10 years. Alternative A has a cost of $10000 and annual benefits of $4500. Alternative B costs $25000 and has annual benefits of $8800.
Calculation:
For A =
| Year | Alternative A | Alternative B |
| 0 | -2500 | -6000 |
| 1 | 746 | 1664 |
| 2 | $746 | 1664 |
| 3 | 746 | 1664 |
| 4 | 746 | 1664 |
| 5 | 746 | 1664 |
| 6 | 746 | 1664 |
| 7 | 746 | 1664 |
| 8 | 746 | 1664 |
| 9 | 746 | 1664 |
| 10 | 746 | 1664 |
| 27.14% | 24.68% |
Conclusion:
Alternative A is selected.
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Chapter 7 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 7 - Prob. 1QTCCh. 7 - Prob. 2QTCCh. 7 - Prob. 3QTCCh. 7 - Prob. 4QTCCh. 7 - Prob. 1PCh. 7 - Prob. 2PCh. 7 - Prob. 3PCh. 7 - Prob. 4PCh. 7 - Prob. 5PCh. 7 - Prob. 6P
Ch. 7 - Prob. 7PCh. 7 - Prob. 8PCh. 7 - Prob. 9PCh. 7 - Prob. 10PCh. 7 - Prob. 11PCh. 7 - Prob. 12PCh. 7 - Prob. 13PCh. 7 - Prob. 14PCh. 7 - Prob. 15PCh. 7 - Prob. 16PCh. 7 - Prob. 17PCh. 7 - Prob. 18PCh. 7 - Prob. 19PCh. 7 - Prob. 20PCh. 7 - Prob. 21PCh. 7 - Prob. 22PCh. 7 - Prob. 23PCh. 7 - Prob. 24PCh. 7 - Prob. 25PCh. 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 - Prob. 43PCh. 7 - Prob. 44PCh. 7 - Prob. 45PCh. 7 - Prob. 46PCh. 7 - Prob. 47PCh. 7 - Prob. 49PCh. 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. 58PCh. 7 - Prob. 59PCh. 7 - Prob. 60PCh. 7 - Prob. 61PCh. 7 - Prob. 62PCh. 7 - Prob. 63PCh. 7 - Prob. 64PCh. 7 - Prob. 65PCh. 7 - Prob. 66PCh. 7 - Prob. 67PCh. 7 - Prob. 68PCh. 7 - Prob. 69PCh. 7 - Prob. 70PCh. 7 - Prob. 71PCh. 7 - Prob. 72PCh. 7 - Prob. 73PCh. 7 - Prob. 74PCh. 7 - Prob. 75PCh. 7 - Prob. 76PCh. 7 - Prob. 77PCh. 7 - Prob. 78PCh. 7 - Prob. 79PCh. 7 - Prob. 80PCh. 7 - Prob. 81PCh. 7 - Prob. 82PCh. 7 - Prob. 83PCh. 7 - Prob. 84PCh. 7 - Prob. 85PCh. 7 - Prob. 87PCh. 7 - Prob. 88PCh. 7 - Prob. 89P
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