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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