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ENG106W12-Q4-solution - -$2,800-$2,000-$800 1 1,100 800 300...

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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 -$2,800 -$2,000 1 +1,100 +800 2 +1,100 +800 3 +1,100 +800 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, A - B Alternatives Increment Year A B A - B 0 -$2,800
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Unformatted text preview: -$2,800 -$2,000-$800 1 +1,100 +800 +300 2 +1,100 +800 +300 3 +1,100 +800 +300 PW A-B = 0 = -800 + 300 X + 300 X 2 + 300 X 3 where X = (1 + i)-1 or ܹܲ ஺ି஻ ൌ 0 ൌ െ800 ൅ 300 ቂ ሺଵା௜ሻ య ିଵ ௜ሺଵା௜ሻ య ቃ ൌ ሺ300 െ 800 ݅ሻ ሺ1 ൅ ݅ሻ ଷ െ 300 b) Given a MARR, what would be the criteria to accept one of the alternatives? If i* > MARR accept A If i* < MARR keep B...
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