You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $125,000 per year; the investment cost is $400,000; and the first year estimated expense of $20,000 and will increase a rate of 5% per year. Assume an 8-year analysis period, no salvage value, and MARR = 15% per year.a. Calculate the PW and FW of this proposal? b. What is the ERR ( Ԑ=MARR) of this proposal?c. What is the Simple and Discounted payback?(Upload the picture of your complete solutions including the correct cash flow diagram and your conclusion.)

(All amounts in $) Part a: T N=8-T A B C D=-A+B-C PV=D/(1+15%)^T FV=D*(1+15%)^N Year Year to…

Answered: You are faced with a decision on an…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $125,000 per year; the investment cost is $400,000; and the first year estimated expense of $20,000 and will increase a rate of 5% per year. Assume an 8-year analysis period, no salvage value, and MARR = 15% per year.

a. Calculate the PW and FW of this proposal?

b. What is the ERR ( Ԑ=MARR) of this proposal?

c. What is the Simple and Discounted payback?

(Upload the picture of your complete solutions including the correct cash flow diagram and your conclusion.)

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