Engineering Economic Analysis
13th Edition
ISBN: 9780190296902
Author: Donald G. Newnan, Ted G. Eschenbach, Jerome P. Lavelle
Publisher: Oxford University Press
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Question
Chapter 8, Problem 3P
To determine
Choice Table whether to invest in X or Y or do nothing.
Expert Solution & Answer
Answer to Problem 3P
At 0% investor will invest in Alternative B
From 1% to 49%, No investment will be done as
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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Chapter 8 Solutions
Engineering Economic Analysis
Ch. 8 - Prob. 1QTCCh. 8 - Prob. 2QTCCh. 8 - Prob. 3QTCCh. 8 - Prob. 4QTCCh. 8 - Prob. 5QTCCh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5P
Ch. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Prob. 13PCh. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Prob. 20PCh. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Prob. 26PCh. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 29PCh. 8 - Prob. 30PCh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Prob. 39PCh. 8 - Prob. 40PCh. 8 - Prob. 41PCh. 8 - Prob. 42PCh. 8 - Prob. 43PCh. 8 - Prob. 44PCh. 8 - Prob. 45P
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