1. The cash flows (in KD) for two mutually exclusive alternatives in Kuwait are as in the table below: [4]

n

Y

X

X - Y

0

-3,000

-12,000

-9,000

1

1,350

4,200

2,850

2

1,800

6,225

4,425

3

1,500

6,330

4,830

RoR (%)

23

18

15

a. Which project would you select at MARR = 20%? Why? [2]

b. Which of the two alternatives is not financially viable? Why? [2]

2. The equivalent annual worth of an increasing arithmetic gradient is $55,400. If the cash flow in year 1 is $17,000 and the gradient amount is $11,000, what is the value of n at an interest rate of 8% per year? [4]