RelativeResourceManager

RelativeResourceManager - 1 ECOR3800 ENGINEERING ECONOMICS...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 ECOR3800 ENGINEERING ECONOMICS Assignment 2 (2010) Solutions Question 1 (a) : NPW(A) = -10,000+2,500(P/A,8%,12) = $8,840.20 NPW(B) = -19,000+3,500(P/A,8%,15) = $10,958.18 NPW(C) = -5000+1000(P/A,8%,10) = $1,710.08 NPW(D) = -20,000+4000(P/A,8%,10) = $10,195.37 ROI(A) = (NPW/P)x100= (8,840.20)/10,000)x100= 88.4% ROI(B) = (10,958.18/19,000)x100 = 57.7% ROI(C) = 34.2% ROI(D) = (10,195.37/20,000)x100 = 51.0% Ranking: A,B,D,C (b) Capital required = $54,000 Question 2: Capital available = $44,000 Try combinations: PW of A+B+C+$10,000 (left over) = [10,000+8,840.20]+[19,000+10,958.18] +[5,000+1,710.08]+10,000 = $65,508.46 PW of B+C+D = [19,000+10,958.18] +[5,000+1,710.08]+[20,000+10,195.37] =$66,863.80 (Best) PW of B+D +$5,000 (left over) = [19,000+10,958.18]+[20,000+10,195.37]+5,000 =$65,153.55 PW of A+D+C+9,000 =[[10,000+*,8840.20] + [20,000+10,195.37] + [5,000+1,710.08] +9,000 = $64,745.65 PW of A+D+$14,000 (left over) = [10,000+8,840.20]+[20,000+10,195.37]+14,000 = $63,035.57 Select Projects B,C,D. ______________________________________________________________________________ Question 3: PW of cost of existing Testing Machine called A = 9,000+ 9,0000(P/A,10%,9)=$60,831.21 (cheapest) PW of cost of New Model Machine called B = 40,000+40,000(P/F,10%,3)= $70,052.59 2 (a) NPW Incremental: NPW for A B = -PW of cost of (B)+PW of cost of (A) = -$70,052.59 + $60,831.21 = - $9,221.38. Do not go to B. A is the choice. (b) IRR Incremental: NPW Incremental: NPW for A B = 0 = - [PW of cost of (B)+PW of cost of (A) = - [40,000+40,000(P/F,i%,3)] + [9,000+ 9,0000(P/A,i%,9)] . Solve by trial and error. IRR is 4.2% <MARR Do not go to B. A is the choice....
View Full Document

This note was uploaded on 02/10/2011 for the course ECON 3800 taught by Professor Asnerob during the Spring '09 term at Spring Arbor University.

Page1 / 5

RelativeResourceManager - 1 ECOR3800 ENGINEERING ECONOMICS...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online