6) What is the Equivalent Annual Cost (EAC) for each of the two options for which the annual cash flows are listed below? (Note: when calculating EAC, you should treat negative cash flows as positive values, and positive cash flows as negative values.) Use i=5%. Option 2 -$50,000 Year Option 1 -$25,000 1 -$3,000 -$7,000 2 -$3,000 -$7,000 3 -$6,000 -$7,000 4 -$6,000 -$8,000 -$6,000 -$8,000 6 -$9,000 -$8,000 -$9,000 -$9,000 8 -$9,000 -$9,000 9. -$9,000 -$9,000 10 $5,000 $9,000

Damien offers you a sequence of end-of-year cash flows for an investment as follows: Year 1 2 3 4 4 What is the value of the cash flows if the opportunity cost is 6 percent? (Round to the nearest dollar). Please click on the following link to access a blank worksheet Click to open:: O $8.392 $8.598 Cash Flow $4,000 $3,000 $2,000 $1,000 $8.734 $8.915

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Consider another set of net cash flows:   Year Cash flow 0 1,000 1 1,000 2 0 3 1,500 4 2,000 5 3,500     What is the net present value of the stream if the opportunity cost of capital is 10 percent? a.  What is the value of the stream at the end of year 5 if the cash flows are invested in an account that pays 10 percent annually? 2. What cash flows today (time 0), in lieu of the 1,000 cash flow, would be needed to accumulate $10,000 at the end of year 5? (Assume that the cash flows for years 1 through 5 remain the same.)

Mendez Company has identified an investment project with the following cash flows. Year Cash Flow 1 2 3 $780 1,050 1,310 1,425 a. If the discount rate is 8 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 25 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 8% b. Present value at 17% c. Present value at 25%

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. Year End Cash Flow Alternative A Alternative B 0 -1,000 600 1 600 500 2 600 -2,000 3 600 400 4 600 200 5 -2,100 -1,000 6 700 1,386   a) Solve for the Net Present Value of the alternatives A and B using interest rates from 0% upward b) what are the rate of return of the two alternatives c) If your MARR is 8 percent, which alternatives would you select? Comment briefly on your results. What are some problems associated with the ROR method?