CIEN 310 Engineering Economy Exam 4 Name Grade at the same time Disclaimer: It i
ID: 2449434 • Letter: C
Question
CIEN 310 Engineering Economy Exam 4 Name Grade at the same time Disclaimer: It is essential to write legibly and show your work. If your work is absent or illegible, and your answer is not without justification may receive little or no credit. 1. Two Action Alternatives (7 Points) A paper mill is considering two tynes of pollution control equipment tely correct answers which are given Neutralization Precipitation $700,000 Initial Cost Annual chemical cost 40,000 Salvage value S500,000 110,000 75,000 Useful life, in years (a) Construct a choice table for interest rates from 0% to 100% (with an incremental amount of 10%. E ,0% 10% 20%, 90%, 100%, etc.) Show your formulas here!(2 points) Show your chart here!(2 points) point) Neutralization Precipitation 30% 80% 100% Show your choice table here!(I point) (b) The firm wants a 12% rate of return on any avoidable increments of investment, which equipment should be purchased? (1 point)Explanation / Answer
a)
IRR method
first we have to calculate( Neutral - prep)
initial cost = -200000
annoual cost = 70000
salvage = 50000
IRR method
0 = -200000+(70000/(1+IRR))+(70000/(1+IRR)^2)+(70000/(1+IRR)^3)+(70000/(1+IRR)^4)+(70000/(1+IRR)^5)+(50000/(1+IRR)^5)
IRR = 26.05%
it means for interest rate less than 26%
project A i.e of neutralization should be choose and after 26% project B
B)
NPV for 12% is
NPV = -700000-(40000/1.12)-(40000/1.12^2)-(40000/1.12^3)-(40000/1.12^4)-(40000/1.12^5)+175000/1.12^5
= -744891.34
for precipitation
NPV = -500000-(110000/1.12)-(110000/1.12^2)-(110000/1.12^3)-(110000/1.12^4)-(110000/1.12^5)+(125000/1.12^5)
= -825597.025
the firm should choose neutralization method
Project A for project B interest rate PV initial cost PV annual cost PV of salvage NPV PV iniitial cost PV annual cost PV salvage NPV 0 -700000 -200000 175000 -725000 -500000 -550000 125000 -925000 1 -700000 -194137.2496 166506.5 -727631 -500000 -533877.4363 118933.21 -914944 2 -700000 -188538.3803 158502.9 -730035 -500000 -518480.5459 113216.35 -905264 3 -700000 -183188.2875 150956.5 -732232 -500000 -503767.7906 107826.1 -895942 4 -700000 -178072.8932 143837.2 -734236 -500000 -489700.4564 102740.89 -886960 5 -700000 -173179.0668 137117.1 -736062 -500000 -476242.4338 97940.771 -878302 6 -700000 -168494.5514 130770.2 -737724 -500000 -463360.0164 93407.272 -869953 7 -700000 -164007.8974 124772.6 -739235 -500000 -451021.718 89123.272 -861898 8 -700000 -159708.4015 119102.1 -740606 -500000 -439198.1041 85072.9 -854125 9 -700000 -155586.0505 113738 -741848 -500000 -427861.639 81241.423 -846620 10 -700000 -151631.4708 108661.2 -742970 -500000 -416986.5446 77615.165 -839371 11 -700000 -147835.8807 103854 -743982 -500000 -406548.6719 74181.416 -832367 12 -700000 -144191.0481 99299.7 -744891 -500000 -396525.3823 70928.357 -825597 13 -700000 -140689.2505 94982.99 -745706 -500000 -386895.4388 67844.992 -819050 14 -700000 -137323.2388 90889.52 -746434 -500000 -377638.9066 64921.083 -812718 15 -700000 -134086.2039 87005.93 -747080 -500000 -368737.0608 62147.092 -806590 16 -700000 -130971.7461 83319.78 -747652 -500000 -360172.3019 59514.127 -800658 17 -700000 -127973.8465 79819.45 -748154 -500000 -351928.0779 57013.894 -794914 18 -700000 -125086.8408 76494.11 -748593 -500000 -343988.8123 54638.652 -789350 19 -700000 -122305.3956 73333.64 -748972 -500000 -336339.8379 52381.171 -783959 20 -700000 -119624.4856 70328.58 -749296 -500000 -328967.3354 50234.697 -778733 21 -700000 -117039.3734 67470.08 -749569 -500000 -321858.277 48192.911 -773665 22 -700000 -114545.5905 64749.87 -749796 -500000 -315000.3738 46249.907 -768750 23 -700000 -112138.9191 62160.21 -749979 -500000 -308382.0276 44400.152 -763982 24 -700000 -109815.3766 59693.85 -750122 -500000 -301992.2858 42638.468 -759354 25 -700000 -107571.2 57344 -750227 -500000 -295820.8 40960 -754861 26 -700000 -105402.8318 55104.28 -750299 -500000 -289857.7874 39360.199 -750498 27 -700000 -103306.9072 52968.72 -750338 -500000 -284093.9949 37834.797 -746259 28 -700000 -101280.2422 50931.7 -750349 -500000 -278520.6661 36379.788 -742141 29 -700000 -99319.8218 48987.98 -750332 -500000 -273129.51 34991.411 -738138 30 -700000 -97422.79009 47132.59 -750290 -500000 -267912.6727 33666.134 -734247 31 -700000 -95586.44029 45360.89 -750226 -500000 -262862.7108 32400.636 -730462 32 -700000 -93808.20578 43668.51 -750140 -500000 -257972.5659 31191.794 -726781 33 -700000 -92085.65166 42051.34 -750034 -500000 -253235.5421 30036.672 -723199 34 -700000 -90416.46686 40505.51 -749911 -500000 -248645.2839 28932.504 -719713 35 -700000 -88798.45691 39027.36 -749771 -500000 -244195.7565 27876.688 -716319 36 -700000 -87229.53702 37613.48 -749616 -500000 -239881.2268 26866.771 -713014 37 -700000 -85707.72575 36260.62 -749447 -500000 -235696.2458 25900.442 -709796 38 -700000 -84231.13903 34965.73 -749265 -500000 -231635.6323 24975.522 -706660 39 -700000 -82797.98459 33725.94 -749072 -500000 -227694.4576 24089.956 -703605 40 -700000 -81406.55679 32538.53 -748868 -500000 -223868.0312 23241.804 -700626 41 -700000 -80055.23168 31400.93 -748654 -500000 -220151.8871 22429.234 -697723 42 -700000 -78742.46249 30310.73 -748432 -500000 -216541.7719 21650.518 -694891 43 -700000 -77466.77533 29265.63 -748201 -500000 -213033.6322 20904.021 -692130 44 -700000 -76226.76519 28263.48 -747963 -500000 -209623.6043 20188.198 -689435 45 -700000 -75021.09219 27302.22 -747719 -500000 -206308.0035 19501.589 -686806 46 -700000 -73848.47803 26379.94 -747469 -500000 -203083.3146 18842.813 -684241 47 -700000 -72707.70274 25494.79 -747213 -500000 -199946.1825 18210.562 -681736