ENGINEERING ECO ANALYSIS W/STUDY GUIDE
ENGINEERING ECO ANALYSIS W/STUDY GUIDE
13th Edition
ISBN: 9780190693053
Author: NEWNAN
Publisher: Oxford University Press
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Chapter 8, Problem 3P
To determine

Choice Table whether to invest in X or Y or do nothing.

Expert Solution & Answer
Check Mark

Answer to Problem 3P

At 0% investor will invest in Alternative B

From 1% to 49%, No investment will be done as net present value is negative

After 50% to 100%, investor will invest in Alternative A.

Explanation of Solution

Given information:

Interest Rate is from 0% to 100%.

Year A B
0 ($10,000) ($15,000)
1--5 3200 4500
Year Cash flow A Cash flow B
0 -10,000 -15,000
1 3,000 4,500
2 3,000 4,500
3 3,000 4,500
4 3,000 4,500
5 3,000 4,500
Interest Rates NPV- A NPV- B Do Nothing Decision
0% 5,000 6,500 - B
1% -24500 -36000 - Do Nothing
2% -24000 -35500 - Do Nothing
3% -23500 -35000 - Do Nothing
4% -23000 -34500 - Do Nothing
5% -22500 -34000 - Do Nothing
6% -22000 -33500 - Do Nothing
7% -21500 -33000 - Do Nothing
8% -21000 -32500 - Do Nothing
9% -20500 -32000 - Do Nothing
10% -20000 -31500 - Do Nothing
11% -19500 -31000 - Do Nothing
12% -19000 -30500 - Do Nothing
13% -18500 -30000 - Do Nothing
14% -18000 -29500 - Do Nothing
15% -17500 -29000 - Do Nothing
16% -17000 -28500 - Do Nothing
17% -16500 -28000 - Do Nothing
18% -16000 -27500 - Do Nothing
19% -15500 -27000 - Do Nothing
20% -15000 -26500 - Do Nothing
21% -14500 -26000 - Do Nothing
22% -14000 -25500 - Do Nothing
23% -13500 -25000 - Do Nothing
24% -13000 -24500 - Do Nothing
25% -12500 -24000 - Do Nothing
26% -12000 -23500 - Do Nothing
27% -11500 -23000 - Do Nothing
28% -11000 -22500 - Do Nothing
29% -10500 -22000 - Do Nothing
30% -10000 -21500 - Do Nothing
31% -9500 -21000 - Do Nothing
32% -9000 -20500 - Do Nothing
33% -8500 -20000 - Do Nothing
34% -8000 -19500 - Do Nothing
35% -7500 -19000 - Do Nothing
36% -7000 -18500 - Do Nothing
37% -6500 -18000 - Do Nothing
38% -6000 -17500 - Do Nothing
39% -5500 -17000 - Do Nothing
40% -5000 -16500 - Do Nothing
41% -4500 -16000 - Do Nothing
42% -4000 -15500 - Do Nothing
43% -3500 -15000 - Do Nothing
44% -3000 -14500 - Do Nothing
45% -2500 -14000 - Do Nothing
46% -2000 -13500 - Do Nothing
47% -1500 -13000 - Do Nothing
48% -1000 -12500 - Do Nothing
49% -500 -12000 - Do Nothing
50% 0 -11500 - A
51% 500 -11000 - A
52% 1000 -10500 - A
53% 1500 -10000 - A
54% 2000 -9500 - A
55% 2500 -9000 - A
56% 3000 -8500 - A
57% 3500 -8000 - A
58% 4000 -7500 - A
59% 4500 -7000 - A
60% 5000 -6500 - A
61% 5500 -6000 - A
62% 6000 -5500 - A
63% 6500 -5000 - A
64% 7000 -4500 - A
65% 7500 -4000 - A
66% 8000 -3500 - A
67% 8500 -3000 - A
68% 9000 -2500 - A
69% 9500 -2000 - A
70% 10000 -1500 - A
71% 10500 -1000 - A
72% 11000 -500 - A
73% 11500 0 - A
74% 12000 500 - A
75% 12500 1000 - A
76% 13000 1500 - A
77% 13500 2000 - A
78% 14000 2500 - A
79% 14500 3000 - A
80% 15000 3500 - A
81% 15500 4000 - A
82% 16000 4500 - A
83% 16500 5000 - A
84% 17000 5500 - A
85% 17500 6000 - A
86% 18000 6500 - A
87% 18500 7000 - A
88% 19000 7500 - A
89% 19500 8000 - A
90% 20000 8500 - A
91% 20500 9000 - A
92% 21000 9500 - A
93% 21500 10000 - A
94% 22000 10500 - A
95% 22500 11000 - A
96% 23000 11500 - A
97% 23500 12000 - A
98% 24000 12500 - A
99% 24500 13000 - A
100% 25000 13500 - A
Year Cash flow A Cash flow B
0 -10,000 -15,000
1 3,000 4,500
2 3,000 4,500
3 3,000 4,500
4 3,000 4,500
5 3,000 4,500
Interest Rates NPV- A NPV- B Do Nothing Decision
0% 5,000 6,500 - B
1% -24500 -36000 - Do Nothing
2% -24000 -35500 - Do Nothing
3% -23500 -35000 - Do Nothing
4% -23000 -34500 - Do Nothing
5% -22500 -34000 - Do Nothing
6% -22000 -33500 - Do Nothing
7% -21500 -33000 - Do Nothing
8% -21000 -32500 - Do Nothing
9% -20500 -32000 - Do Nothing
10% -20000 -31500 - Do Nothing
11% -19500 -31000 - Do Nothing
12% -19000 -30500 - Do Nothing
13% -18500 -30000 - Do Nothing
14% -18000 -29500 - Do Nothing
15% -17500 -29000 - Do Nothing
16% -17000 -28500 - Do Nothing
17% -16500 -28000 - Do Nothing
18% -16000 -27500 - Do Nothing
19% -15500 -27000 - Do Nothing
20% -15000 -26500 - Do Nothing
21% -14500 -26000 - Do Nothing
22% -14000 -25500 - Do Nothing
23% -13500 -25000 - Do Nothing
24% -13000 -24500 - Do Nothing
25% -12500 -24000 - Do Nothing
26% -12000 -23500 - Do Nothing
27% -11500 -23000 - Do Nothing
28% -11000 -22500 - Do Nothing
29% -10500 -22000 - Do Nothing
30% -10000 -21500 - Do Nothing
31% -9500 -21000 - Do Nothing
32% -9000 -20500 - Do Nothing
33% -8500 -20000 - Do Nothing
34% -8000 -19500 - Do Nothing
35% -7500 -19000 - Do Nothing
36% -7000 -18500 - Do Nothing
37% -6500 -18000 - Do Nothing
38% -6000 -17500 - Do Nothing
39% -5500 -17000 - Do Nothing
40% -5000 -16500 - Do Nothing
41% -4500 -16000 - Do Nothing
42% -4000 -15500 - Do Nothing
43% -3500 -15000 - Do Nothing
44% -3000 -14500 - Do Nothing
45% -2500 -14000 - Do Nothing
46% -2000 -13500 - Do Nothing
47% -1500 -13000 - Do Nothing
48% -1000 -12500 - Do Nothing
49% -500 -12000 - Do Nothing
50% 0 -11500 - A
51% 500 -11000 - A
52% 1000 -10500 - A
53% 1500 -10000 - A
54% 2000 -9500 - A
55% 2500 -9000 - A
56% 3000 -8500 - A
57% 3500 -8000 - A
58% 4000 -7500 - A
59% 4500 -7000 - A
60% 5000 -6500 - A
61% 5500 -6000 - A
62% 6000 -5500 - A
63% 6500 -5000 - A
64% 7000 -4500 - A
65% 7500 -4000 - A
66% 8000 -3500 - A
67% 8500 -3000 - A
68% 9000 -2500 - A
69% 9500 -2000 - A
70% 10000 -1500 - A
71% 10500 -1000 - A
72% 11000 -500 - A
73% 11500 0 - A
74% 12000 500 - A
75% 12500 1000 - A
76% 13000 1500 - A
77% 13500 2000 - A
78% 14000 2500 - A
79% 14500 3000 - A
80% 15000 3500 - A
81% 15500 4000 - A
82% 16000 4500 - A
83% 16500 5000 - A
84% 17000 5500 - A
85% 17500 6000 - A
86% 18000 6500 - A
87% 18500 7000 - A
88% 19000 7500 - A
89% 19500 8000 - A
90% 20000 8500 - A
91% 20500 9000 - A
92% 21000 9500 - A
93% 21500 10000 - A
94% 22000 10500 - A
95% 22500 11000 - A
96% 23000 11500 - A
97% 23500 12000 - A
98% 24000 12500 - A
99% 24500 13000 - A
100% 25000 13500 - A
Year Cash flow A Cash flow B
0 -10,000 -15,000
1 3,000 4,500
2 3,000 4,500
3 3,000 4,500
4 3,000 4,500
5 3,000 4,500
Interest Rates NPV- A NPV- B Do Nothing Decision
0% 5,000 6,500 - B
1% -24500 -36000 - Do Nothing
2% -24000 -35500 - Do Nothing
3% -23500 -35000 - Do Nothing
4% -23000 -34500 - Do Nothing
5% -22500 -34000 - Do Nothing
6% -22000 -33500 - Do Nothing
7% -21500 -33000 - Do Nothing
8% -21000 -32500 - Do Nothing
9% -20500 -32000 - Do Nothing
10% -20000 -31500 - Do Nothing
11% -19500 -31000 - Do Nothing
12% -19000 -30500 - Do Nothing
13% -18500 -30000 - Do Nothing
14% -18000 -29500 - Do Nothing
15% -17500 -29000 - Do Nothing
16% -17000 -28500 - Do Nothing
17% -16500 -28000 - Do Nothing
18% -16000 -27500 - Do Nothing
19% -15500 -27000 - Do Nothing
20% -15000 -26500 - Do Nothing
21% -14500 -26000 - Do Nothing
22% -14000 -25500 - Do Nothing
23% -13500 -25000 - Do Nothing
24% -13000 -24500 - Do Nothing
25% -12500 -24000 - Do Nothing
26% -12000 -23500 - Do Nothing
27% -11500 -23000 - Do Nothing
28% -11000 -22500 - Do Nothing
29% -10500 -22000 - Do Nothing
30% -10000 -21500 - Do Nothing
31% -9500 -21000 - Do Nothing
32% -9000 -20500 - Do Nothing
33% -8500 -20000 - Do Nothing
34% -8000 -19500 - Do Nothing
35% -7500 -19000 - Do Nothing
36% -7000 -18500 - Do Nothing
37% -6500 -18000 - Do Nothing
38% -6000 -17500 - Do Nothing
39% -5500 -17000 - Do Nothing
40% -5000 -16500 - Do Nothing
41% -4500 -16000 - Do Nothing
42% -4000 -15500 - Do Nothing
43% -3500 -15000 - Do Nothing
44% -3000 -14500 - Do Nothing
45% -2500 -14000 - Do Nothing
46% -2000 -13500 - Do Nothing
47% -1500 -13000 - Do Nothing
48% -1000 -12500 - Do Nothing
49% -500 -12000 - Do Nothing
50% 0 -11500 - A
51% 500 -11000 - A
52% 1000 -10500 - A
53% 1500 -10000 - A
54% 2000 -9500 - A
55% 2500 -9000 - A
56% 3000 -8500 - A
57% 3500 -8000 - A
58% 4000 -7500 - A
59% 4500 -7000 - A
60% 5000 -6500 - A
61% 5500 -6000 - A
62% 6000 -5500 - A
63% 6500 -5000 - A
64% 7000 -4500 - A
65% 7500 -4000 - A
66% 8000 -3500 - A
67% 8500 -3000 - A
68% 9000 -2500 - A
69% 9500 -2000 - A
70% 10000 -1500 - A
71% 10500 -1000 - A
72% 11000 -500 - A
73% 11500 0 - A
74% 12000 500 - A
75% 12500 1000 - A
76% 13000 1500 - A
77% 13500 2000 - A
78% 14000 2500 - A
79% 14500 3000 - A
80% 15000 3500 - A
81% 15500 4000 - A
82% 16000 4500 - A
83% 16500 5000 - A
84% 17000 5500 - A
85% 17500 6000 - A
86% 18000 6500 - A
87% 18500 7000 - A
88% 19000 7500 - A
89% 19500 8000 - A
90% 20000 8500 - A
91% 20500 9000 - A
92% 21000 9500 - A
93% 21500 10000 - A
94% 22000 10500 - A
95% 22500 11000 - A
96% 23000 11500 - A
97% 23500 12000 - A
98% 24000 12500 - A
99% 24500 13000 - A
100% 25000 13500 - A

Conclusion:

At 0% investor will invest in Alternative B

From 1% to 49%, No investment will be done as net present value is negative

After 50% to 100%, investor will invest in Alternative A.

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