(a)
The alternative that should be selected.
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Answer to Problem 55P
The alternative F should be selected.
Explanation of Solution
Calculations:
The table for cash flow and cumulative cash flow for project E is shown below.
Year | Cash flow | Cumulative cash flow |
0 | ||
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
6 |
Table (1)
Here, the cumulative cash flow becomes positive in
Calculate the payback period for project E.
The table for cash flow and cumulative cash flow for project F is shown below.
Year | Cash flow | Cumulative cash flow |
0 | ||
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
6 |
Table (2)
Here, the cumulative cash flow becomes positive in
Calculate the payback period for project F.
The table for cash flow and cumulative cash flow for project G is shown below.
Year | Cash flow | Cumulative cash flow |
0 | ||
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
6 |
Table (3)
Here, the cumulative cash flow becomes NIL in
The table for cash flow and cumulative cash flow for project H is shown below.
Year | Cash flow | Cumulative cash flow |
0 | ||
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
6 |
Table (4)
Here, the cumulative cash flow becomes positive in
Calculate the payback period for project H.
The payback period for project F is minimum which is equal to
Thus, the alternative F should be selected.
Conclusion:
The alternative F should be selected.
(b)
The alternative that should be selected.
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Answer to Problem 55P
The alternative G should be selected.
Explanation of Solution
Given:
The interest rate is
Concept used:
Write the expression for future worth factor.
Here, the time period is
Calculations:
The table for future worth analysis of alternatives is shown below.
Year | Future worth factor |
Project (E) | Project (F) | Project (G) | Project (H) | |||||
Cash flow2 | Future worth3 |
Cash flow4 | Future worth5 |
Cash flow6 | Future worth7 |
Cash flow8 | Future worth9 |
|||
0 | ||||||||||
1 | ||||||||||
2 | ||||||||||
3 | ||||||||||
4 | ||||||||||
5 | ||||||||||
6 | ||||||||||
Total |
Table (5)
The alternative G has the maximum future worth.
Thus, thee alternative G should be selected.
Conclusion:
The alternative G should be selected.
(c)
The alternative that should be selected.
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Answer to Problem 55P
The alternative G should be selected.
Explanation of Solution
Given:
The interest rate is
Calculations:
The table for future worth analysis of alternatives is shown below.
Year | Future worth factor |
Project (E) | Project (F) | Project (G) | Project (H) | ||||
Cash flow 2 | Future worth 3 |
Cash flow 4 | Future worth 5 |
Cash flow 6 | Future worth 7 |
Cash flow 8 | Future worth 9 |
||
0 | |||||||||
1 | |||||||||
2 | |||||||||
3 | |||||||||
4 | |||||||||
5 | |||||||||
6 | |||||||||
Total |
Table (6)
The alternative G has the maximum future worth.
Thus, the alternative G should be selected.
Conclusion:
The alternative G should be selected.
(d)
The benefit cost ratio for alternate G.
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Answer to Problem 55P
The benefit cost ratio for alternate G is
Explanation of Solution
Given:
The interest rate is
Concept used:
Write the expression for present worth of benefits.
Here rate of interest is
Write the expression for benefit cost ratio.
Here, the present worth of costs is
Calculations:
Calculate the present worth of benefits.
Substitute
Calculate the benefit cost ratio.
Substitute
Thus, the benefit cost ratio for alternate G is
Conclusion:
The benefit cost ratio for alternate G is
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Chapter 9 Solutions
ENGR.ECONOMIC ANALYSIS W/DASHBOARD
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