SA Q. Acceptable alternatives are those having @ PW (IS%)2 6 ALTERNATIVE 4 PwlIs%) = -£409, 000+ $ir,200( YaIS%, 10) + $ 10,000 (Ur ,w%.710) 3 G21, 242.24 ALTPRNATIVE 2 PW(IEW) = $162, 0004 4 21, 900 ( Za,I6 %, 12) [¥6,099-72])* Choose a ternative “Fth positive value ALTERNATIVE 3 Pw (10%) = - § 1BY,000 #35;900( Ta C210) +4 16, o0a( Tp si % , 70) 7 $ 117.0% ALTERNATIVE ¥ Pw (rs og 220,000 94.41, 500( A, 15 %,10) +£20,000( TF, 16%, t0) + 0798.80 4. Ip total investment capital ic limited +o $200,006 ,AMemnahve 2 chould be welected vince Heir wHhin She buclget and ir ative economically Feanble, $3 PRESENT WORTH NETHOD Puls, (40%) = ~ $4 00,000 -( 948,000 + £40,000 +$ 60,0004 § 12,00) % 10%.10) = - $e 242,708 Pipa (10%) -$7%40,000- ($68,000 $45,004 6 400,000+$ 1,000)[ Jp. , 107190.) =~ $ 5,233 208.86 Pp» (70%) = ~$4, 270/000 {f taaooo+$ usj000+$ 120,00044251000)(% 408,10) * -£ $797,098.00 Prony (702)= - $4,400, 000-{4 1% 000 +$:0,000+4 97,000 4528, 000 Yh 10% , ®) =-45,123)000. yo & Select Design Dz te minimize the precent worth oF coctr x Furure woRTH METHO Foye (10 %)* ~$6.00,000(,/p, 10%, 12) C4ue,006 +4 40,0064 4 wo, doe 4 $1,000 )( Tp 70% 410) > $ -19,909,392 Scanned with CamScannerPUp, (20%) * ~$9¢0,000( Tf 10% , 70) * ($08,0004$ 46,0004 J 400,000 141,000) (Ys 10%, 10) ~~ 949,573, 639 Perr (10%) = - $7, 2,006 (Mr, 10 %,10)- ($ 120,000 + $5,000 4. 420,0004 2s, 00 (10% , 70) gy $19) 2 7SO Fury (107)=-$ 4,.00,000( Jp, fo%,t0) -($12% ,000 1450, 000 11770, 000 $20,000 ( TA ,10%,7) =-$13,297,968 .cetect Decign Dy 10 minimize the Tuture Worth oF cost F 5.5 4: AW, (12%) = -$2,506 ( Yp, 12% ,¢) + 150 + $2,000 (fp, 2%,5) +-$2,5008( 0.2774) +$450 + $2,000 (0-4599) 7 $371.30 5. Aun (12%) = -$41000 ( “fp, 12% ,9) + 1,200 $2,000 ( “Vp, 2% ,S) ~ $405.20 Aw, (12%) *F 44008 -(-4500)] “p, 12%,8) #(4 1.200 $750) > $405.20 a: AMernative 2 chould be celected. In parte AaNd bya ternative 2 war chown + have tne Jarges+ Aw. In part ¢, the annual north of +e ncremental jnvestmen+ needed por alternative 2 was chown to be positive meaning that i+ @arnc more than the gurred RY per year- Scanned with CamScanner€-F Rank aitemativec by incréacing capital Investment :A,B,C,D ande. Since ANE IRR on Equipment Ay MARR ytHican acceprable bare altemative. therefore the IRR, on b(B~A muctbe eramintd - A(c) Awy (i%%) = -$e,000(M%e 142,70) 12,2000 i’s* 42.9% >NARR stherepore welect & A(B-A) AWas(i'4%) © (£50,000 438,000) ("Yp, ¥,.10% ) (644,100 - $11,000) = © * ~$12,000( “fp, % 10) 143,00 =0 15* 22.9% 7MARR atherepore celect A A (D-c) Avs (73%) = $ 6000 (“/p ih Ye , 10) + § 500-0 Since 3 cash outpiowc =< cach inplows, i’s =0% ¢ av bert $-10 ‘The Fanking oF the alternative ky Increacing capital lavertment yc A, C, and Is Aiternatye # an acceptable bare altemative? Pug (1%) » ~$ 200,000 + $ 90,000( Yn 5i°% ,G)=0 Py teal and error)? IRR, =-3%.3%) >NARR » 7: ceptable av bare alternative . PM, (16% ) = ~$ 200,000 +4.0,000(% 116% ,6) *$1¥0,008 which icqreater than zero. .. ageptable ac bace atternatve. + Poth methode remultin the decicion f Inver in decrgn B. o12 Q. AW Method °. hy ‘Awa (le%) = 8 86/600( Mir mi, 4) -47,000 = $20,186 Auly (12%) =-67;200 (Vpn %, #) -d 1%, 100 $25, 993 AWe (12%) =~ $71, B00 (“p12 %, 4) ~$ 10,08 0 =F 25,787 * Select DecignC 10 minimize annual equivalent eort * Scanned with CamScannerb. ERP Method + the ranking op alternatives based on increasing capital miert~ ment is Bic ,and A.ciNce theve are cort altematives phe one with the lear} Capriq) invertmen+ B iv the bare aliernaive . Decision : Select Parign C sis Fw, (10%) = - $780,000 "/p,10%, 3) +. $158,060( "Za ,70% 170) $174,037 Fp (102) = - £4, 8Y°, 000 ( Vp, 10% ,10) +4$371,000(% ,70%, ) = $184,123 Decision: Select AHernative Bt» Matimize future worth IB Ascume Q common 40 yr. liFe ane uce whe Aw method . Aw, (10% )= ~ $£0,000( “/p,10% ,20) +4 10,000(%p, 0%, 2) - $9)000 ~ ~$ 14,304 Avp (1%) = ~$120,000(/p, 40%, yo)+ $20,006( "Vp 70% , yo) - $7,000. t300( Ya , 10% .Y0) = -$ 14,902 Atte (10% ) = -4 193, 736 over 10 yeare 2 PMp (10% = -$ 195,686 19 over Yo yearr. a. Pug (1% ) =-$272/000 - $28,800( Ma jo %, 4) + $25/000( Ye yc%h,0)+ £ 6000 (Ph 16% 12) (YpsIo% 6) ae --$ 163,798 Pwr (1%) = -$ 244 ,006~$19, 200( 9 16% ,4) +$42/000 (Pe, I$% 19) > - $426,720 Decielon: ) $ yoyo $0, 701 (147459 = ¢ yoy,202 ERR, - 19.9% 7MARR.therepore we lect Atterncttive B 4 Pu (%) = -£.94800( Th i, 4) = $462 yp Thus lacing crane A ir NOT prererred 10 the velected alternative Bp, but would be preferred othe Purchace oF crane A, S.2Dd YPEA Armud! cart (excucg depreciation )A¢,000 1.$22/000 74 ¢,000 +$26,006 7 (26.9%) $57, 392 Puy *$28,000 +457, 242( % 526.4%, 70 ) = $28,000 #404392] 1- (14 20.7%)" Zay * $207, 97. co ve TYE DB Annual cor} (excluding depreciation ) = $13,000 +£29, 000 r£6, 000% $ $8,000 (24.3%) = Pu, 2405, 0004.£03, 585 (Mh , 27-72% no) 1200 (24.7%) = $o3,506 = $284,175.07 TREC Annua| Cort * $22,000 4 32,000 tt 70,000 +f ¥¢,000(22.9 %) = $72,960 Pue = $40,000 t $72,406 (Fa, 229% 510) +9322, cu0. Decision: type A should be velected . + Scanned with CamScannerS24 a: Repeatability Accumption Ae, (ict) = -$1%006( "fp .18 %o8) - $14, 000F 44, 000( "fp, 157 =f 10,990 Alps (18%) = $4,001 Yp,te% 20)-£9,000+$ 12, 000(Me, ie %, 207) = -$ 14,200 “select Altematve ty minimize cost ¥ b. Coferminated Accumption (&-yearctudy Period ) A We, (16%) =~ 16, 990, Mus + [$ 66,000( “fp, 1% 20) -$17,000( “fp , 1% 2)|(% 1 1E% 1S) 4 $12 008/ Tp th 15) = $64,590 AWen * ~$05/000( Np, 150/65) - $9,000 +4 61,590 (Mp , 6% =) = - $19,256 Deckcion : elect Atternative Ey 0g $50,000 ( “Ip, 10% ,25) 4451000 (Ye 10%, 2¢)- $ 11200] Cu, (10%) = oe = -$66,990 7 -$40,000(“/r, 10%, s )-$ €600 (% ,10% ue) Fp, 1044 c0)-49, 000 itp (10/6) = 0.10 = - $139,163 Decicion: Select Plan Ato minimize cot ates E50, 00(“/p, 10% , 1 20%e 20) +$ 10,000 ("/r , 10% 26) - tae a 0 ( VF 110% (2 ) $7,000] = = $147,000 ye (10%) « [:$120, 000( “lp ,10%, £0)+420,000(M/p 10%.) -$5 oc] 0.10 = = $14,000 Decision: Serect Decigh Da 1 minimize cor — Scanned with CamScanner2: —- [-$274,000(“p, 18 %,8%)-$ 12,000 - $ 50,000 (Vr s15%,0)) Cw, (15%) = n (15%) a * = $378,733 a » Cy (15% [-$224,000 (“lr,15 %192,)- $8,000-$ 42,000 (Me, 1%,7)] 0.15 7 $404,645 pericion: Select Bridge L te minimize cost GA1 This ctudy Paints out td important conditions that may arise Jn invertmen+ ctudlier, Foret the invent ment of an amount beyond the miqimum may be necescary te Maked Project curFieclently eFrective to provide enough return to be Financially round . second, i+ Is nececcary Kownyto ENoW how Far+the Investing op adantional capital exist tnan is Offered vy ne Increave above +he point oF a callsfactory rate oF return tthe logical te Mvect the adaitioaal ia~ crement and obtain thie contentment retum. thke procers could continue, ac 1ong asthe return grem each additional increment We greater-than phe contentment (minimum attractive rate. m Mic problem ,a butlding wih $0 clorler SHOIILD BE RECOMMENDED when the MARR ic 1S %. ; Scanned with CamScanner