DescriptionChpt 9

9.18

The executives of the XYZ Company are considering the three independent proposals whose

cash flows are given in Table 9-12, The MARR is 10%. Evaluate these three proposals by the

NPV method.

9.19

Rework Problem 9.18 for MARR = 15%.

9.21

The capital budgeting committee of the ABC Company is contemplating five independent

proposals for projects to be included in the forthcoming year’s budget; their cash flows

are given in Table 9-13. The ABC Company has established a MARR of 20%. Assuming

that capital is not rationed, which projects should the company select and what is the

total investment required? Use the ROR method.

Chpt 10

10.10

A company decides to automate a process by installing a machine that costs $8000 and is

expected to save $2500 per year. Discuss the wisdom of this decision, if the economic life of the

machine is 10 years, at which time it has a $2000 salvage value, and if the MARR is 15%.

Answer

The present worth of the decision is (costs counted negative):

PW = -$8000 + $2000(P/F, 15%, 10) + $2500(P/A, 15%, 10) = +$5041.38 that is, the company

can expect net savings of $5041.38 (today’s dollars) over the next 10 years.

10.11

Solve Problem 10.10 for an economic life of 3 years.

10.13

For a MARR of 15%, find the economic life of the new machine in Problem 10.3.

Chpt 9

9.18

The executives of the XYZ Company are considering the three independent proposals whose

cash flows are given in Table 9-12, The MARR is 10%. Evaluate these three proposals by the

NPV method.

9.19

Rework Problem 9.18 for MARR = 15%.

9.21

The capital budgeting committee of the ABC Company is contemplating five independent

proposals for projects to be included in the forthcoming year’s budget; their cash flows

are given in Table 9-13. The ABC Company has established a MARR of 20%. Assuming

that capital is not rationed, which projects should the company select and what is the

total investment required? Use the ROR method.

Chpt 10

10.10

A company decides to automate a process by installing a machine that costs $8000 and is

expected to save $2500 per year. Discuss the wisdom of this decision, if the economic life of the

machine is 10 years, at which time it has a $2000 salvage value, and if the MARR is 15%.

Answer

The present worth of the decision is (costs counted negative):

PW = -$8000 + $2000(P/F, 15%, 10) + $2500(P/A, 15%, 10) = +$5041.38 that is, the company

can expect net savings of $5041.38 (today’s dollars) over the next 10 years.

10.11

Solve Problem 10.10 for an economic life of 3 years.

10.13

For a MARR of 15%, find the economic life of the new machine in Problem 10.3.

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