Consider the investments in the chart. COMPUTE THE EQUIVALENT ANNUAL WORTH OF EA
ID: 2770691 • Letter: C
Question
Consider the investments in the chart. COMPUTE THE EQUIVALENT ANNUAL WORTH OF EACH PROJECT AT i = 10%. Project'scash flow($) n A B C 0 -4500 -8000 -12000 1 3000 -2000 2000 2 2000 6000 4000 3 1000 2000 8000 4 500 4000 8000 5 500 2000 4000 Consider the investments in the chart. COMPUTE THE EQUIVALENT ANNUAL WORTH OF EACH PROJECT AT i = 10%. Project'scash flow($) n A B C 0 -4500 -8000 -12000 1 3000 -2000 2000 2 2000 6000 4000 3 1000 2000 8000 4 500 4000 8000 5 500 2000 4000Explanation / Answer
PROJECT - A
Year
Cashflows
PV factor at 10%
Net Present Value
PROJECT - B
Year
Cashflows
PV factor at 10%
Net Present Value
PROJECT - C
Year
Cashflows
PV factor at 10%
Net Present Value
PROJECT - A
Year
Cashflows
PV factor at 10%
Net Present Value
0 ($4,500) 1 ($4,500) 1 $3,000 0.9091 $2,727.30 2 $2,000 0.8264 $1,652.80 3 $1,000 0.7513 $751.30 4 $500 0.683 $341.50 5 $500 0.6209 $310.45 Present Worth $1,283 Equivalent Annual Worth (AE) =PW(i) * (A/P, i, N) EAW = $1,283 * 0.263796 EAW of Project A= $338.45PROJECT - B
Year
Cashflows
PV factor at 10%
Net Present Value
0 ($8,000) 1 ($8,000) 1 $2,000 0.9091 $1,818.20 2 $6,000 0.8264 $4,958.40 3 $2,000 0.7513 $1,502.60 4 $4,000 0.683 $2,732.00 5 $2,000 0.6209 $1,241.80 Present Worth $4,253 Equivalent Annual Worth (AE) = PW(i) *(A/P, i, N) EAW = $4,253 * 0.263796 EAW of Project B= $1,121.92PROJECT - C
Year
Cashflows
PV factor at 10%
Net Present Value
0 ($12,000) 1 ($12,000) 1 $2,000 0.9091 $1,818.20 2 $4,000 0.8264 $3,305.60 3 $8,000 0.7513 $6,010.40 4 $8,000 0.683 $5,464.00 5 $4,000 0.6209 $2,483.60 Present Worth $7,082 Equivalent Annual Worth (AE) = PW(i) *(A/P, i, N) EAW = $7,082 * 0.263796 EAW of Project C= $1,868.20