Engineering Economy (16th Edition) - Standalone book
16th Edition
ISBN: 9780133439274
Author: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 55P
(a):
To determine
Calculate the future worth.
(b):
To determine
Calculate the
(c):
To determine
Calculate the payback period.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Mary, a project manager for ABC Ic., is reviewing a product quality improvement project.
She has determined that the project's Annual Worth of $3,396. for a period of 8 years.
She now has to calculate the IRR for the project but unfortunately she has lost some information about the cash flows.
She knows only that the project has:
a 8-year project life with an initial cost of $400,000.
a set of equal revenue cash flows occurred at the end of each year for 8 years, and
• MARR used for calculation the Annual Worth was 8%.
Find the annual revenue first and then calculate the IRR for the project = ?
O 14% < IRR (i*) < 15%
O 13% < IRR (i*) < 14%
O 10% < IRR (i*) < 11%
O 9% < IRR (i*) < 10%
O 8% < IRR (i*) < 9%
If mutually exclusive projects with normal cash flows are being analyzed, the net present value (NPV) and internal rate of return (IRR) methods
always
agree.
Projects Y and Z are mutually exclusive projects. Their cash flows and NPV profiles are shown as follows.
Year
Project Y Project Z
0
-$1,500
-$1,500
1
$200
$900
2
$400
$600
3
$600
$300
4
$1,000
$200
NPV (Dollars)
800
600
Project Y
400
Project Z
200
-200
0246
8
10 12 14 16 18 20
COST OF CAPITAL (Percent)
If the weighted average cost of capital (WACC) for each project is 14%, do the NPV and IRR methods agree or conflict?
O The methods agree.
O The methods conflict.
Projects A and B are mutually exclusive. The minimum attractive rate of return (MARR) is 12%.
Using rate of return analysis, which project should be selected?
If the image fails to load here, go to https://www.dropbox.com/s/ld6wctqieu8jgwp/ROR.jpg >>
Year
0
A
B
- $750
- $1,150
B-A
- $400
123
$200
$300
$100
$200
$350
$150
$200
$400
$200
4
$600
$700
$100
ROR
17.68%
16.44%
13.69%
Project A
Project B
Both Project A and B
Select none of the project.
Insufficient information to make a decision.
Chapter 5 Solutions
Engineering Economy (16th Edition) - Standalone book
Ch. 5.A - Use the ERR method with = 8% per year to solve for...Ch. 5.A - Apply the ERR method with = 12% per year to the...Ch. 5.A - Are there multiple IRRs for the following...Ch. 5.A - Are there multiple IRRs for the following cash...Ch. 5 - Tennessee Tool Works (TTW) is considering...Ch. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - A large induced-draft fan is needed for an...
Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Determine the FW of the following engineering...Ch. 5 - Prob. 22PCh. 5 - Fill in Table P5-23 below when P = 10,000, S = 2,...Ch. 5 - Prob. 24PCh. 5 - A simple, direct space heating system is currently...Ch. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Stan Moneymaker has been informed of a major...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Prob. 43PCh. 5 - To purchase a used automobile, you borrow 10,000...Ch. 5 - Your boss has just presented you with the summary...Ch. 5 - Experts agree that the IRR of a college education...Ch. 5 - A company has the opportunity to take over a...Ch. 5 - The prospective exploration for oil in the outer...Ch. 5 - Prob. 49PCh. 5 - An integrated, combined cycle power plant produces...Ch. 5 - A computer call center is going to replace all of...Ch. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - Prob. 57PCh. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - a. Calculate the IRR for each of the three...Ch. 5 - Prob. 61PCh. 5 - Prob. 62PCh. 5 - Prob. 63PCh. 5 - Prob. 64SECh. 5 - Prob. 65SECh. 5 - Prob. 66SECh. 5 - A certain medical device will result in an...Ch. 5 - Refer to Problem 5-61. Develop a spreadsheet to...Ch. 5 - Prob. 69CSCh. 5 - Prob. 70CSCh. 5 - Suppose that the average utilization of the CVD...Ch. 5 - Prob. 72FECh. 5 - Prob. 73FECh. 5 - Prob. 74FECh. 5 - Prob. 75FECh. 5 - Prob. 76FECh. 5 - Prob. 77FECh. 5 - Prob. 78FECh. 5 - Prob. 79FECh. 5 - A new machine was bought for 9,000 with life of...Ch. 5 - Prob. 81FECh. 5 - Prob. 82FECh. 5 - Prob. 83FECh. 5 - Refer to Problem 5-2. Assuming the residual value...
Knowledge Booster
Similar questions
- What is the IRR for an investment of $X that returns $Y at the end of each year for Nyears? X=$11,040 Y=$992.25 N=41 yearsarrow_forwardVidhi is investing in some rental property in Collegeville and is investigating her income from the investment. She knows the rental revenue will increase each year, but so will the maintenance expenses. She has been able to generate the data that follows regarding this investment opportunity. Assume that all cash flows occur at the end of each year and that the purchase and sale of this property are not relevant to the study. • If Vidhi's MARR = 6% per year, is this investment a profitable undertaking? Use Future Worth method! Year Revenue Year Expenses 1 $6,000 1 $3,100 2 6,200 2 3,300 6,300 3 3,500 6,400 4 3,700 6,500 5 3,900 6,600 6 6,100 6,700 7 4,300 6,800 8 4,500 6,900 4,700 7,000 4,900 3 4 5 6 7 8 9 10 9 10arrow_forwardIf a company must choose between two projects, it should proceed with the one that generates a higher IRR True Falsearrow_forward
- Problem 06.027 AW of a Permanent Investment How much must you deposit each year into your retirement account starting now and continuing through year 10 if you want to be able to withdraw $75,000 per year forever, beginning 30 years from now? Assume the account earns interest at 10% per year. The amount to be deposited is determined to be $arrow_forwardA design change being considered by Mayberry, Inc., will cost $6,000 and will result in an annual savings of $1,000 per year for the 6-year life of the project. A cost of $2,000 will be avoided at the end of the project as a result of the change. MARR is 8%/yr. Solve, a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Should Mayberry implement the design change?arrow_forwardAn aircraft hangar requires a new high-efficiency HVAC system for environmental control and reducing heating and cooling expenses. The cost of the HVAC system is $5.0 million, and the annual savings are expected to be $400,000. The useful life of the HVAC system is 20 years, and its residual value is zero. a) What is the simple payback period? b) What is the internal rate of return? (Note: You can use the tables in the book or Excel to find the IRR, but in either case show work and/or cut & paste a spreadsheet. If using the tables an approximate answer will be acceptable)arrow_forward
- Only typed answer Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $360 million. The annual upkeep is expected to amount to $850,000. The turf will have to be replaced every 13 years at a cost of $980,000. Painting every 7 years will cost $97,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i = 9% per year? The estimated capitalized cost is $_______arrow_forwardSolve with complete solution and draw the cash flow diagram A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $20,000 per year over the six-year study period. If MARR of 18% determine whether this is a good investment. a) Use the PW method. PW = $___ b) Determine the Simple Payback Period. ___yearsarrow_forwardSolve with complete solution and draw the cash flow diagram A new municipal refuse-collection truck can be purchased for $84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately $20,000 per year over the six-year study period. If MARR of 18% determine whether this is a good investment. a) Use the PW method. PW = $___ b) Determine the Simple Payback Period. ___years Note: For equivalent worth, round off the final answer to whole number. For Rate of Return, round off to two decimal places (in percentage)arrow_forward
- Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $5,560 at the end of each of the next 3 years. The opportunity requres an initial investment of $1,390 plus an additional investment at the end of the second year of $6,950. What is the NPV of this opportunity if the interest rate is 2.2% per year? Should Marian take it?arrow_forwardA $45,000 investment in a new conveyor system is projected to improve throughput and increasing revenue by $14,000 per year for five years The conveyor will have an estimated market value of $4,000 at the end of five years. Using an MARR = 12% per year, what is the FW? $-19,329.40 $13,635.70 $16,998.90 none of the above K ?arrow_forwardNet present value (NPV) of the project =Single payoff x PVIAF (10.20%, 9 years) - initial outlay = $6,947 x 0.42340 - $2,182 = $759.39 What's the equation for the bolded item?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education