hw5 sol - CE 167: Engineering Economy Assignment 5 Solution...

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CE 167: Engineering Economy Assignment 5 Solution Set Spring 2008 1) 0 1 2 3 4 5 7 8 $180 $ 100 $90 $ 100 $ 100 6 $90 $ 100 $ 100 a) without discounting year cashflow Account balance 0 -$180 -$180 1 -$90 -$270 2 $0 -$270 3 $100 -$170 4 $100 -$70 5 $100 $30 6 -$90 -$60 7 $100 $40 8 $100 $140 Payback period covers the time span until the account balance hits zero first. This happens between years 4 and 5. Using interpolation payback period = 4.7 years b. To solve for the payback period with discounted cash flows, repeat the above calculation, but discount each of the cash flows, at 5%,to their present value (P). year Cashflow (P/F, i%, n) P=F(P/F, i%, n) Account balance 0 -$180 1 -180.00 -$180.00 1 -$90 0.9524 -85.72 -$265.72 2 $0 0.907 0.00 -$265.72 3 $100 0.8638 86.38 -$179.34 4 $100 0.8227 82.27 -$97.07 5 $100 0.7835 78.35 -$18.72 6 -$90 0.7462 -67.16 -$85.87 7 $100 0.7107 71.07 -$14.80 8 $100 0.6768 67.68 $52.88 Discounted payback period is between years 7 and 8. Using interpolation discounted payback period = 7.2 years
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This note was uploaded on 02/27/2011 for the course CE 167 taught by Professor Horvath during the Fall '08 term at University of California, Berkeley.

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hw5 sol - CE 167: Engineering Economy Assignment 5 Solution...

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