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Solutions to Homework _6

# Solutions to Homework _6 - Solutions to HW#6 11-1 IE 1040...

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Solutions to HW #6 IE 1040 Fall, 2005 11.1 First, rank order alternatives from low capital investment to high capital investment: DN A B C (here we assume doing nothing, DN, is an option). Next, consider incremental capital investments by using Equation 11-4: (A-DN): B/ C = \$120.000/\$144,000 = 0.83 < 1 where C = \$1,300,000(A/P,10%,20) - \$500,000(A/F,10%,20) Reject A (B-DN): B/ C = \$300,000/\$184,000 = 1.63 > 1 where C = \$1,700,000(A/P,10%,20) - \$900,000(A/F,10%,20) Select B (C-B): B/ C = \$150,000/\$192,250 = 0.78 < 1 where C = \$1,800,000(A/P,10%,20) - \$1,100,000(A/F,10%,20) Select B as best . 11.8 Alt. A: Expand present storage facility Alt. B: Entirely new facility Examine (B-A): For (B-A), if Benefits ÷ Costs ≥ 1 select Alt. B; otherwise go with Alt. A because it is less costly. C B = )] 25 %, 12 , / ( 000 , 200 \$ ) 25 %, 12 , / ( 000 , 500 [\$ )] 25 %, 12 , / ( 000 , 500 \$ ) 25 %, 12 , / ( 000 , 050

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Solutions to Homework _6 - Solutions to HW#6 11-1 IE 1040...

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