Consider the following sets of investment projects. All projects have a 3-year investment life. Period (n) Project's Cash Flow (Pesos) years 0 1 2 3 A -30,000 15,000 55,000 65,000 B -10,000 -30,000 10,000 30,000 (a) Compute the net future worth of each project at i=13% (b) Which project is the most acceptable с 25,000 -70,000 20,000 40,000
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- FIRST COST ANNUAL COST SALVAGE VALUE ANNUAL INTEREST RATE STUDY PERIOD Power Line 20,000 1,950.90/month × 12= 23,410.8/year Solar 25,000 × 7= 125,000+10,000= 135,000 3,000 0 1.5% 25 0 3.5% 25 ALTERNATIVE A: A solar panel costs 25,000. 7 solar panels are needed in a company. The installation fee is 10,000 and will have a useful 25 years with no salvage value. The maintenance per year is 5,000. The annual interest rate for solar panel is 2%. ALTERNATIVE B: A new power line will cost 20,000, with power costs expected to be 1,950.90 per month. Th annual increase rate of electric bill is about 3.5%. Which alternative should be selected on the basis of a future worth analysis? Illustrate the cash flow diagram. USE MS EXCEL IN COMPUTATION and SHOW THE SOLUTION PROPERLY.Determine feasibility of the project using FW Method. Use MARR = 10%. %3D Alternatives A В C D Capital investment -$150,000 -$85,000 -$75,000 -$120,000 Annual revenues $28,000 $16,000 $15,000 $22,000 Annual expenses -$1,000 -$550 -$500 -$700 Market Value (EOL) $20,000 $10,000 $6,000 $11,000 Life (years) 10 10 10 10 Round off your answer to the NEAREST WHOLE NUMBER Ex. 12345 FW of Alt. A is Blank 1 FW of Alt. B is Blank 2 FW of Alt. C is Blank 3 FW of Alt. D is Blank 4A P 3.3 M 1,000,000 320,000 330,000 B P 3.4 M 1,120,000 420,000 340,000 C D P 4.4 M P 2.8 M 750,000 1,400,000 180,000 500,000 280,000 440,000 Investment Annual revenue Annual cost Salvage value All of the proposals have a project life of 10 years. D and E are mutually exclusive. It is also known that B is contingent on D, while A and C are contingent on E. The maximum amount available for investment is P 4.5 M. Matrix of Investment Alternatives (Format) Alternative A B C E P 5.2 M 1,600,000 550,000 520,000 a. Develop the matrix of investment alternatives. Indicate which alternatives are feasible. (Follow the format of the table given below). D E Feasible? b. Use the Future Worth method to find the best alternative. Assume that MARR is 14% per year.
- Three mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given next. The MARR is 20% per year. At the conclusion of the useful life, the investment will be sold A B $28,000 $55,000 Capital Investment Annual Expenses Annual Revenues MV at EOY 10 Useful life ACapital Investment AMarket Value AAnnual Income (REV - EXP) Blank 1 15,000 AIRR 23,000 4 PW 6,000 8,000 10,000 10 years 10 years 10 years Use incremental analysis to determine the best alternative on the basis of PW method & IRR method. Is increment justified? 13,000 28,000 Blank 1 Blank 4 Blank 7 Blank 10 Blank 13% Blank 16 C $40,000 Blank 19 22,000 32,000 Blank 2 Blank 5 Blank 8 Blank 11 Blank 14% Blank 17 Blank 20 Blank 3 Blank 6 Blank 9 Blank 12 Blank 15% Blank 18 Blank 21FIRST COST ANNUAL COST SALVAGE VALUE ANNUAL INTEREST RATE STUDY PERIOD Power Line 20,000 1,950.90/month × 12= 23,410.8/year Solar 25,000 X 7= 125,000+10,000= 135,000 3,000/year 0 3.5% 25 ALTERNATIVE A: A solar panel costs 25,000. 7 solar panels are needed in a company. The installation fee is 10,000 and will have a useful 25 years with no salvage value. The maintenance per year is 5,000. The annual interest rate for solar panel is 1.5%. 0 1.5% 25 ALTERNATIVE B: A new power line will cost 20,000, with power costs expected to be 1,950.90 per month. The annual increase rate of electric bill is about 3.5%. Which alternative should be selected on the basis of a future worth analysis? Illustrate the cash flow diagram. USE MS EXCEL IN COMPUTATION and SHOW THE SOLUTION PROPERLY.QUESTION 5 For the below ME alternatives , which machine should be selected based on the PW analysis. MARR=10%. Machine A Machine B Machine C First cost, $ 15000 30000 12,358 Annual cost, $/year 19,219 6,000 4,000 Salvage value, $ Life, years 4,000 5,000 1,000 Answer the below questions : C- PW for machine C =
- 2-A company has requested price offers from two companies for the equipment they will purchase. Estimated cash flows based on the price offers of both companies are as follows. MCFO = %10 А В Initial investment cost,$ -1500000 -2250000 Annual operating cost, $ -700000 -600000 Scrap value, $ Service Life, $ 100000 50000 8 8 a)Using Annual Value Analysis, find out which option will be more economical. b) Solve with esent value analysis.Buying Equipment 1 from XYZ company and company ABC will give the production similar productivity input of 400,000.00 per year. The equipment from company XYZ has a purchase price of 200,000.00, annual maintenance of 5,000.00, and production life of 10 years, while the equipment from company ABC has a purchase price of 100,000.00, annual maintenance of 2,000.00, and production life of 12. Using present worth method, what is the present values of their purchase profit? Use MARR of 20%Buying Equipment 1 from XYZ company and company ABC will give the production similar productivity input of 400,000.00 per year. The equipment from company XYZ has a purchase price of 200,000.00, annual maintenance of 5,000.00, and production life of 10 years, while the equipment from company ABC has a purchase price of 100,000.00, annual maintenance of 2,000.00, and production life of 12. Using present worth method, what is the total present worth of each alternatives? Use MARR of 20%
- A start up business is considering two types of equipment - data are as follows: TYPE A ΤΥΡE Β First Cost P200,000.00 P300,000.00 Annual operating cost 32,000.00 24,000.00 Annual labor cost 50,000.00 32,000.00 Insurance and property taxes 3% 3% Payroll taxes 4% 4% Estimated life 10 10 The minimum required rate of return is 15%. Using present worth cost method, determine the value of alternative A and alternative B: ANSWER for ALTERNATIVE A: Blank 1 ANSWER for ALTERNATIVE B: Blank 2 Blank 1 Add your answer Blank 2 Add your answer1) Consider the follows Projects: If MARR- 17%. Recommend the best choice based upon ROR analysis: с -800 190 0 BOY D Initial Cost Annual income -2000 260 Salvage value Life 0 10 10 Known ROR 22% 18% 16.9% Need exact value of the incremental ROR on the last comparison. Others need its reasonable range for proper decision in the process. -500 140 0 10 24% B -1000 250 0 10Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR = 15% per year. "Do Nothing" is not an option. A B C Capital investment $15,000 $16,000 $13,500 $18,100 Annual costs 260 290 450 110 Market value at EOY 10 900 1,350 1,700 2,050 FW (15%) - $65,062 - $69,267 ??? - $73,408