i. Interest Rates preferred for each payment plan.

Question

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Answer 1

Question

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

To determine

ii.

Impact on environment due to glossy paper of magazine.

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.

Explanation of Solution

Given:

Subscription of Magazine with different plans.

Concept used:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Conclusion:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

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Students have asked these similar questions

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Your marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000. Group Value Frequency Baby boomers $5 20% Generation X $4 10% Generation Y $3 10% `Tweeners $2 10% Seniors $2 10% Others $0 40% ur marketing department has identified the following customer demographics in the following table. Construct a demand curve and determine the profit maximizing price as well as the expected profit if MC=$1. The number of customers in the target population is 10,000.

Answer 2

Question

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

To determine

ii.

Impact on environment due to glossy paper of magazine.

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.

Explanation of Solution

Given:

Subscription of Magazine with different plans.

Concept used:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Conclusion:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

To determine

ii.

Impact on environment due to glossy paper of magazine.

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.

Explanation of Solution

Given:

Subscription of Magazine with different plans.

Concept used:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Conclusion:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

To determine

ii.

Impact on environment due to glossy paper of magazine.

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.

Explanation of Solution

Given:

Subscription of Magazine with different plans.

Concept used:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Conclusion:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

To determine

ii.

Impact on environment due to glossy paper of magazine.

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.

Explanation of Solution

Given:

Subscription of Magazine with different plans.

Concept used:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Conclusion:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Answer 6

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Answer 7

Chapter 8, Problem 24P

To determine

i.

Interest Rates preferred for each payment plan.

Answer 8

Expert Solution

Answer to Problem 24P

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Availability of Magazine for $58 for 1 year

Availability of Magazine for $108 for 2 year

Availability of Magazine for $153 for 3 year

Availability of Magazine for $230 for 5 year.

Calculation:

There are four alternatives available for payment.

Year	A	B	C	D	D-A
1	-58	-108	-153	0	58
2	-58	0	0	0	58
3	-58	-108	0	-230	-172
4	-58	0	-153	0	58
5	-58	-108	0	0	58
6	-58	0	0	-230	-172
7	-58	-108	-153	0	58
8	-58	0	0	0	58
9	-58	-108	0	-230	-172
10	-58	0	-153	0	58
11	-58	-108	0	0	58
12	-58	0	0	-230	-172
13	-58	-108	-153	0	58
14	-58	0	0	0	58
15	-58	-108	0	-230	-172
16	-58	0	-153	0	58
17	-58	-108	0	0	58
18	-58	0	0	-230	-172
19	-58	-108	-153	0	58
20	-58	0	0	0	58
21	-58	-108	0	-230	-172
22	-58	0	-153	0	58
23	-58	-108	0	0	58
24	-58	0	0	-230	-172
25	-58	-108	-153	0	58
26	-58	0	0	0	58
27	-58	-108	0	-230	-172
28	-58	0	-153	0	58
29	-58	-108	0	0	58
30	-58	0	0	-230	-172

The number of periods extended to 30 years because of different useful life. One alternative is available for 5 years and other is for 3 years and another one is available for 2 years. So, the least common factor is 1,2,3 and 5 is 30. This table represents the cash flow of all the four alternatives. Negative value means cash outflow and zero value means neither cash inflow nor cash outflow.

Graph of net present worth of all four alternatives versus interest rate.

Graph:

ENGINEERING ECO ANALYSIS W/STUDY GUIDE, Chapter 8, Problem 24P

The graph clears the picture and explains that the alternative C and D are not part of the answer. Only alternative A and D is important.

Net Present worth of (Alternative B)-(Alternative A):

NPW = −P+A(P/A,i,n)−F1(P/F1,i,n)−F2(P/F2,i,n)−F3(P/F3,i,n) −F4(P/F4,i,n)

P = initial Cost

A = annual payment that is uniform all the period

F₁ = Future value in 6^th year

F₂ = future Value in 11^th year

F₃ = Future Value in 16^th year

F₄ = future value in 21^st year

F₅ = Future Value in 26^th year

I = rate of return

N = time period

P	A	F1	F2	F3	F4	F5	i	n
$172	$58	$230	$230	$230	$230	$230	?	$30

Time period

6 for F₁

11 for F₂

16 for F₃

21 for F₄

26 for F₅

0 = −$172+$58(P/A,i,30)−$230(P/F1,i,6)−$230(P/F2,i,11)−$230(P/F3,i,6) −$230(P/F4,i,6)−$230(P/F5,i,6)

Interest rate	(P/A,i,30)	(P/ F1,i,6)	(P/ F2,i,11)	(P/ F3,i,16)	(P/ F4,i,21)	(P/ F5,i,26)
15.00%	6.566	0.4343	0.2149	0.1069	0.0531	0.0264
18.00%	5.571	0.3704	0.1619	0.0708	0.0309	0.0135

The rate of return, which is between 15% and 18% is computed by linear interpolation:

IRR = i%low+(i%high−i%low)[Flow−PFlow−Fhigh]

i%low = Lower interest rate

i%high = Higher interest rate

Flow = factor of lower interest rate

Fhigh = factor of higher interest rate

IRR = 15%+(18%−15%)[$189.1−$172$189.1−$172−($171.06−$172)]

IRR = 15%+3%[$17.1$18.039]

IRR = 15%+3%×0.9479

IRR = 15%+0.02843

IRR = 0.17843

Therefore, the incremental rate of return is 17.84%.

Conclusion:

Choice Table:

Interest rate	Best Choice
0%	Alternative D
17.84%	Alternative A

Answer 13

To determine

ii.

Impact on environment due to glossy paper of magazine.

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.

Explanation of Solution

Given:

Subscription of Magazine with different plans.

Concept used:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Conclusion:

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.

Glossy paper of magazine results in contamination of recycling process of paper.

Ultraviolet sealing coating on glossy paper complicated recycling of paper.

Glossy papers are made with toxic chlorine, which leads to soil pollution.

Answer 14

To determine

ii.

Impact on environment due to glossy paper of magazine.

Answer 15

Expert Solution

Answer to Problem 24P

Lead to highest destruction of forest which had been sustainably managed. As magazine requires higher-grade paper.
Glossy paper of magazine results in contamination of recycling process of paper.
Ultraviolet sealing coating on glossy paper complicated recycling of paper.
Glossy papers are made with toxic chlorine, which leads to soil pollution.