ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Eight projects are available for selection at Hum-Vee Motors. The listed PW values are
determined at the corporate MARR of 10% per year and rounded to the nearest $1000. Project
lives vary from 5 to 15 years. (Please see figure attached)
Project selection guidelines:
1. No more than $400,000 in investment capital is available.
2. No negative PW project may be selected.
3. At least one project, but no more than three, must be selected.
4. The following selection restrictions apply to specific projects:
• Project 4 can be selected only if project 1 is selected.
• Projects 1 and 2 are duplicative; don’t select both.
• Projects 8 and 4 are also duplicative.
• Project 7 requires that project 2 also be selected.
(a) Identify the viable project bundles and select the best economically justified projects. What is
the investment assumption for any remaining capital funds?
(b) If as much of the $400,000 as possible must be invested, use the same restrictions and
determine the project(s) to select. Is this a viable second choice for investing the $400,000?
Why?
Transcribed Image Text:Project
1
2
3
4
5
Initial
Investment, $
-1,500,000
-300,000
-95,000
-400,000
-195,000
-175,000
-100,000
-400,000
PW value
at 10%, $
-50,000
+35,000
-9,000
+ 75,000
+125,000
-27,000
+62,000
+110,000
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