You wish to evaluate four independent projects that all have a 10-year life at MARR = 15% per year. Preliminary estimates for first cost, annual net income, and SV have been made. A B C D First cost, $ −1,200 −2,000 −5,000 −7,000 Annual net income, $/year 200 400 1100 1300 Salvage value, $ 5 6 8 7 (a) Accept or reject each project using a present worth analysis. On your spreadsheet, include the logical IF function to make the accept/ reject decision. (b) The preliminary estimates have changed for projects A and B as shown below. Use the same spreadsheet to reevaluate them. A B First cost, $ −1,000 −2,200 Annual net income, $/year 300 440 Salvage value, $ 8 0

Consider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. Air-Conditioning System 1 System First cost, $ AOC. $ per year Salvage valué, $ New compressor and motor cost at midlife, $ Life, years -9,000 -850 -100 Proy -2,200 8 The annual worth of air-conditioning system 1 when the MARR is 4% is $ The annual worth of air-conditioning system 2 when the MARR is 4% is $ The annual worth of air-conditioning system 1 when the MARR is 6% is $ The annual worth of air-conditioning system 2 when the MARR is 6% is $ 10 www Air-Conditioning System 2 -13,000 -105 -300 -3,140 12

If the MARR=10%, compute the value of X that makes the alternatives equally desirable. Do not use spreadsheets.    Alternatives Machine A Machine B First cost $12,000 $20,000 Annual Operating cost   $1,400/year   X Salvage value $2,000 $3,000 Life 4 years 8 years

A dyeing and finishing plant is interested in acquiring a dyeing machine for the production of a new product. Three alternatives are being considered assummarized below. Which alternative should be recommended if the plant’sMARR (hurdle rate) is 15% per year using (a) the IRR method and (b) the annual worth method?