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PS 9 - Comparison of Alternatives

# PS 9 - Comparison of Alternatives - 6 6 IRR 15.3 16.1 NPV A...

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IE 150 Problem Set 9 Comparison of Alternatives Instructions:  Write/Type/Print your answers on yellow pad or bond paper (NO A4’s). Use a different sheet per  problem.  Use phrases  to describe what you are doing. Do not present it as just a series of equations and  numbers.  Label each step. Ex: “Step 1: Set-up the Total Revenue Equation”, “Step 4: Solve for the NPV”.  Box the final answers.  Use clear formatting: Indent at each step. Show your answers in just 1 column. (The problem set  will be read from top to bottom, and not top bottom diagonal right bottom.) Problem 1:  Two mutually exclusive alternatives are available. If MARR = 15%, select the one best alternative using  the NPV method. Remember that do nothing is an option.  A B Initial Investment 9,000 6,000 Annual Cashflow 2,400 1,600 Salvage Value 0 300 Useful Life

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Unformatted text preview: 6 6 IRR 15.3% 16.1% NPV A = 82.8 NPV B = 184.89 Choose B Problem 2: Consider the three small mutually exclusive investment alternatives in the table below. The feasible alternative chosen must provide service for a 10-year period. The MARR is 12% per year and the market value of each is 0 at the end of the useful life. Which alternative should be chosen? A B C Initial Investment 2,000 8,000 20,000 Annual Revenues Less Expenses 600 2,200 3,600 Useful Life 5 5 10 Since the alternative chosen must provide 10 years of service, you can assume that investments A and B will be available for re-purchase at end of year 5. Use the Future Worth (year 10) Method, in comparing the alternatives. FW A = 792.7828 FW B = -338.5898 FW C = 1,058 IE 150 Problem Set 9 Comparison of Alternatives...
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PS 9 - Comparison of Alternatives - 6 6 IRR 15.3 16.1 NPV A...

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