Contemporary Engineering Economics (6th Edition)
6th Edition
ISBN: 9780134105598
Author: Chan S. Park
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 42P
To determine
Calculate the MARR.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose we have four mutually exclusive projects, D1, D2, D3, and D4, whose internal rates of return on incremental investment between the projects is given as follows:IRR (Dl - D2) = 27.62%IRR {Dl - D3) = 14.26%IRR {Dl - D4) = 25.24%IRR (D3 - D2) = 30.24%IRR (D2- D4) = 17.34%IRR (D3 - D4) = 16.14%Which project should be selected at MARR 15%?
Consider the two investments with the following sequences of cash flows
Compute for i* for each investment
What are the NPW of each alternatives with an MARR of 15%
If A & B are mutually exclusive, which project is more economically desirable? (Incremental)
MARR = 8%. Your consultancy business signs on with a new client. The client pays you $5000 up front as deposit toward future work. One year later the client makes another payment of $5000. The year after that you invest $16,000 into the project. The following year, in the third year, the client pays you the remaining balance of $5388. The project's precise ERR is within 0.5% of a) 12% b) 13% c) 4% d) 15% e) None of the above
Chapter 5 Solutions
Contemporary Engineering Economics (6th Edition)
Ch. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - If a project costs 100,000 and is expected to...Ch. 5 - Refer to Problem 5.2, and answer the following...Ch. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Consider the cash flows from an investment...Ch. 5 - Prob. 10P
Ch. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Consider the project balances in Table P5.19 for a...Ch. 5 - Your RD group has developed and tested a computer...Ch. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 24PCh. 5 - Prob. 25PCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Geo-Star Manufacturing Company is considering a...Ch. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Two methods of carrying away surface runoff water...Ch. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - Prob. 46PCh. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - Prob. 57PCh. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - Prob. 1STCh. 5 - Prob. 2ST
Knowledge Booster
Similar questions
- You are considering two types of automobiles. Model A costs $18,000, andModel B costs $15,624.Although the two models are essentially the same, Model A can be sold for $9,000 after four years of use while Model B can be sold for $6,500 after the same amount of time. Model A commands a better resale value because its styling is popular among young college students. Determine the rate of return on the incremental investment of $2,376. For what range of values of your MARR is Model A preferable?arrow_forwardIf a company must choose between two projects, it should proceed with the one that generates a higher IRR True Falsearrow_forwardThe town council of Cato Springs is considering two alternative investments to upgrade and expand its spring-fed recreational area. The two investment alternatives (A and B) have different costs and will produce different public benefits. The projected costs and benefits over a 10-year planning horizon for the two alternatives are given below. Using a MARR of 7.0%, which, if either, of the alternatives should be pursued by the Cato Springs city council? CF (Benefits for Alt A) CF (Benefits for Alt EOY CF (Costs for Alt A) CF (Costs for Alt B) B) $7,590,000 $10,310,000 1 $2,240,000 $1,400,000 $3,360,000 $2,200,000 $400,000 $2,596,000 $600,000 $3,755,000 $600,000 $3,003,600 $800,000 $4,056,600 4 $800,000 $3,446,100 $1,000,000 $4,377,300 5 $1,000,000 $3,651,400 $1,200,000 $4,624,800 $1,200,000 $3,876,600 $1,400,000 $4,949,800 7 $1,400,000 $4,135,700 $1,600,000 $5,365,600 8 $1,600,000 $4,506,400 $1,800,000 $5,649,600 9 $1,800,000 $5,458,900 $2,000,000 $6,252,300 10 $2,000,000 $6,987,400…arrow_forward
- Lithium, Inc. is considering two mutually exclusive projects, A and B. Project A costs $95,000 and is expected to generate $65,000 in year one and $75,000 in year two. Project B costs $120,000 and is expected to generate $64,000 in year one, $67,000 in year two, $56,000 in year three, and $45,000 in year four. Lithium, Inc.'s required rate of return for these projects is 10%. The profitability index for Project A is Select one: а. 1.22. b. 1.27. С. 1.12.arrow_forwardQuestion 4 Consider a proposal to enhance production of tortillas en a taqueria. The new machine is estimated to cost $30 million and will incur an additional $1 million per year in maintenance costs. The machine will produce annual savings of $6 million each year. The Minimum acceptable rate of return (MARR) is 11% per year, and the study period is five years at which time the machine will be obsolete (worthless). What is the maximum (minimum) value of maintenance cost that reverse your decision? Write 4 decimalsarrow_forwardAnne made an investment of P8,000,000.00 and earns a yearly gross income of P5,000,000.00. The projected annual costs for his operation are as follows: labor costs of P1,000,000.00; material costs of P1,500,000.00; and opportunity costs of P1,200,000.00. If his company has a 20% Rate of Return goal, decide if this project is in line with Anne's objective or not.arrow_forward
- Another method to deal with the unequal life problem of projects is the equivalent annual annuity (EAA) method. In this method the annual cash flows under the alternative investments are converted into a constant cash flow stream whose NPV is equivalent to the NPV of the comparative project's Initial stream. Consider the case of Three Waters Boatbuilders: Three Waters Boatbuilders is considering a three-year project that has a weighted average cost of capital of 10% and a net present value (NPV) of $85,647. Three Waters Boatbuilders can replicate this project indefinitely. The equivalent annual annuity (EAA) for this project is The EAA approach to evaluating projects with unequal lives does not do a good job of taking inflation into account.arrow_forward❖ Problem 1 Using Microsoft Excel, create an investment cash-flow diagram that will have a present worth of zero using MARR = 12.75%. The study period needs to be exactly 10 years and each year should have at least one unique cash flow that is different from the cash flows over the other years. Your answer should contain a table showing the cash flows for each year and a graphical representation of the cash flows (cash-flow diagram).arrow_forwardVita Pharmaceutical Co. is considering four proposals for the expansion of its dietary supplements production facility. The investment requirements and the cash flows for an 8-year period are presented below. P1 P2 P3 P4 Initial Investment P13M P14.5M P15M P15.8M Annual Receipts 1.5M 1.6M 1.7M 2.2M Annual Disbursements 0.7M 0.5M 0.65M 0.7M Salvage Value 1.3М 1.5M 2M 2.5M Determine the best alternative if the company applies a 14% MARR for its investments. (Ans. Consider P4; i2-1 = 13.27%; 13-1=5.91%; 144 =21.76%)arrow_forward
- If you invest $5,095 in a long-term venture, you will receive $1,000 per year forever. Assuming your interest rate is 8% per year, what is the capitalized worth of your investment? Choose the closest answer below. OA. The capitalized worth of your investment is $7,836. OB. The capitalized worth of your investment is $7,405. OC. The capitalized worth of your investment is $4,169. OD. The capitalized worth of your investment is $7,789.arrow_forwardThree investments are being studied by Bright Star Construction Limited. The table below provides the estimated cash flow for each of the three investments over the next five years. Due to budget constraints, Bright Star can only select one investment out of the three investments. At a MARR (Minimum Acceptable Rate of Return) of 12%, answer the following. Investment 1 2 3 a) b) Initial Cost $9,000,000 $5,000,000 $7,000,000 Expenses per Year $3,000,000 $1,500,000 $2,000,000 Return at end of year 5 $38,000,000 $20,000,000 $29,000,000 Use a rate of return method to determine the economically best investment for Bright Star. Are you expecting different results if the comparison is based on Annual Worth? (Hint: no calculations are needed). c) What are the case(s) in which a rate of return method is recommended? d) Is it always necessary for the alternative with the highest rate of return to be the best alternative?arrow_forwardwhat is the rate of return for each alternative and for the incremental difference? if the MARR is 10%, which alternative should be selected? Alternatives A and B require investments of $10,310 and $13,400, respectively. Their respective net annual cash inflows are $3,300 and $4,000. What is the rate of return for each alternative and for thearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education