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Answered: - Engineering Economy - Comparison of Projects 1. Four mutually


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Engineering Economy ? Comparison of Projects

 

1. Four mutually exclusive projects are being evaluated, with information shown below.

 

I

 

$ 100,000

 

$ 15,200

 

$ 10,000

 

12

 


 

Capital Investment

 

Annual R ? E

 

Market value

 

Useful Life

 


 

II

 

$ 152,000

 

$ 31,900

 

$

 

12

 


 

III

 

$ 184,000

 

$ 35,900

 

$ 15,000

 

12

 


 

IV

 

$ 220,000

 

$ 41,500

 

$ 20,000

 

12

 


 

a. If the MARR = 15% per year, use the PW method to determine which alternatives are economically acceptable

 

and which should be selected.

 

b. Perform a FW, AW, and IRR analysis and confirm your answer from a.

 

c. If you only had $200,000 for the capital investment, which should be selected?

 


 

2. Consider the three mutually exclusive projects below, with an MARR = 10%.

 


 

EOY

 


 

1

 


 

2

 


 

3

 


 

0

 


 

$

 


 

(10,000)

 


 

$

 


 

(8,500)

 


 

$

 


 

(11,000)

 


 

1-3

 


 

$

 


 

5,125

 


 

$

 


 

4,450

 


 

$

 


 

5,400

 


 

a. Calculate each project?s PW, AW, FW, and IRR.

 

b. Which would you recommend?

 

c. Why might one project have the highest PW while a different project has the largest IRR?

 


 

3. Consider the following 2 mutually exclusive alternatives for reclaiming a deteriorating inner-city neighborhood.

 


 

EOY

 


 

Alt X

 


 

Alt Y

 


 

0

 


 

(100,000)

 


 

$

 


 

1

 


 

$

 


 

50,000

 


 

$

 


 

-

 


 

2

 


 

$

 


 

51,000

 


 

$

 


 

-

 


 

3

 

a.

 

b.

 

c.

 

d.

 


 

$

 


 

(100,000)

 


 

$

 


 

60,000

 


 

$

 


 

205,760

 


 

What is each project?s IRR?

 

What is the IRR on the incremental cash flow (i.e., (Y ? X)?

 

What is the ?simple payback period? for each alternative?

 

Which alternative would you recommend, with an MARR = 15%?

 


 

 


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DATE ANSWERED

Oct 07, 2020

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