Create Pl Problem 6-5 (book/static) EQuestion Help Consider the cash fows in the
ID: 1143272 • Letter: C
Question
Create Pl Problem 6-5 (book/static) EQuestion Help Consider the cash fows in the table below for the following investment projects (ARR and determine the acceptability of each project 5%) Determine the annual equivalent worth Or each project at-15% PDF Pack files to PDF tombine them ile types with Click the icon to view, the data for cash flows Click the icon to view the interest factors for discrete compounding when MAR-15% per year ption The annual equivalent worth of Project A is $(69 Round to the nearest dollar) le to Convert Select File Felie
Explanation / Answer
MARR = 15%
Annual Equivalent Cost (AEC) of Project A
Calculate the NPW at 15%
NPW = -3500 + 1500 (P/F, 15%, 1) + 1800 (P/F, 15%, 2) + 1000 (P/F, 15%, 3) + 600 (P/F, 15%, 4)
NPW = -3500 + 1500 (.8696) + 1800 (.7561) + 1000 (.6575) + 600 (.5718)
NPW = 166
AEC = PW (A/P, 15%, 4)
AEC = 166 (.3503)
AEC = 58
Annual Equivalent Cost (AEC) of Project B
Calculate the NPW at 15%
NPW = -4000 + 1600 (P/F, 15%, 1) + 1500 (P/F, 15%, 2) + 1500 (P/F, 15%, 3) + 1500 (P/F, 15%, 4)
NPW = -4000 + 1600 (.8696) + 1500 (.7561) + 1500 (.6575) + 1500 (.5718)
NPW = 368
AEC = PW (A/P, 15%, 4)
AEC = 369 (.3503)
AEC = 129
Annual Equivalent Cost (AEC) of Project C
Calculate the NPW at 15%
NPW = -6500 + 2000 (P/F, 15%, 1) + 2000 (P/F, 15%, 2) + 2500 (P/F, 15%, 3) + 2500 (P/F, 15%, 4)
NPW = -6500 + 2000 (.8696) + 2000 (.7561) + 2500 (.6575) + 2500 (.5718)
NPW = -175
AEC = PW (A/P, 15%, 4)
AEC = -175 (.3503)
AEC = -61
On the basis of the above calculations we should select the Project B because of positive highest AEC