Principles of Engineering Economic Analysis
6th Edition
ISBN: 9781118163832
Author: John A. White, Kenneth E. Case, David B. Pratt
Publisher: Wiley, John & Sons, Incorporated
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Question
Chapter 8, Problem 33P
a:
To determine
Selection of alternate with MARR 50%.
b:
To determine
Selection of alternate with MARR 41%.
c:
To determine
Selection of alternate with MARR 41%.
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Suppose Omni Consumer Products's CFO is evaluating a project with the following cash
inflows. She does not know the project's initial cost; however, she does know that the
project's regular payback period is 2.5 years.
Year Cash Flow
Year 1 $350,000
Year 2 $400,000
Year 3 $475,000
Year 4 $475,00
If the project's weighted average cost of capital (WACC) is 9%, what is its NPV?
$373,562
$336,206
$317,528
$429,596
The following cash flows result from a potential construction project for your company:
1. Receipts of $505,000 at the start of the contract and $1,200,000 at the end of the fourth year
2. Expenditures at the end of the first year of $400,000 and at the end of the second year of $900,000
3. A net cash flow of $0 at the end of the third year.
Using an appropriate rate of return method (Approximate ERR), for a MARR of 20%, should your company accept this project
(Perform all calculations using 5 significant figures and round your answer to one decimal place. Also remember that text
answers are case-sensitive):?
Answers entered using text are case sensitive!
What is the approximate ERR for this project? Number
Should your company undertake this project? (Enter either 'Yes' or 'No'):
%
Chapter 8 Solutions
Principles of Engineering Economic Analysis
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