Homework+2b

# It is estimated that it will produce annual revenues

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It is estimated that it will produce annual revenues of \$2,000 while incurring annual expenses of \$400. At retirement at the end of the fourth year it is estimated that the asset will be sold for \$900. At that time it is expected that \$700 will have to be paid to remove the asset from the plant. The interest rate is 8% compounded annually. Calculate the present worth, future worth and annual worth of this asset. 5. Two investment proposals, C and D, have the same first cost of \$5,000. The only receipt received from C is a single amount of \$21,500, 8 years from the time the investment is undertaken. Proposal D has 8 equal annual receipts of \$3,000 beginning one year after the initial investment. Compare the present worth of each project when MARR = 10% and when MARR = 20%. 6. An automobile owner is concerned about the increasing cost of gasoline. He feels that the cost of gasoline will be increasing at the rate of 3% per year over this year’s price of \$3.40 per gallon. Experience with his car indicates that he averages 19 miles per gallon of gasoline. Since he expects to drive an average of 19,000 miles each year, what is the present worth of the cost of fuel for this individual for the next 4 years? MARR = 12%. 7. What is the annual equivalent cost of fuel for the auto owner in problem 6?

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ISyE 3025: Homework 2b 8. A company is considering Proposals 1, 2, and 3, one of which must be adopted.
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