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ENG106W12-Q4makeup-solution

# ENG106W12-Q4makeup-solution - -\$1,000-\$1,400-\$400 1 400 550...

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ENG 106 Winter ‘12 Open Notes Quiz #4 Name: Two mutually exclusive (ME) alternatives have the following cash flows: Alternatives Year A B 0 -\$1,000 -\$1,400 1 +400 +550 2 +400 +550 3 +400 +550 We want to choose one of the alternatives. a) Set up the equation to solve for the rate of return on the increment of investment, but do not solve . Set up increment as an investment, B - A Alternatives Increment Year A B B - A 0 -\$1,000
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Unformatted text preview: -\$1,000 -\$1,400-\$400 1 +400 +550 +150 2 +400 +550 +150 3 +400 +550 +150 PW B-A = 0 = -400 + 150 X + 150 X 2 + 150 X 3 where X = (1 + i)-1 or ܹܲ ஻ି஺ ൌ 0 ൌ െ400 ൅ 150 ቂ ሺଵା௜ሻ య ିଵ ௜ሺଵା௜ሻ య ቃ ൌ ሺ150 െ 400 ݅ሻ ሺ1 ൅ ݅ሻ ଷ െ 150 b) Given a MARR, what would be the criteria to accept one of the alternatives? If i* > MARR accept B If i* < MARR keep A...
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