1. A remotely situated fuel cell has an installed cost of BD2,000 and will reduce the existing expense by BD350 per year for eight years. The companys MARR is 10% per year.

1. What is the minimum salvage value after eight years that makes the fuel cell worth purchasing?
2. What is the fuel cells IRR if the salvage value is negligible?

2. A new automotive dry paint separation process is environmentally friendly and is expected to save BD8.00 per car painted at Isa Town plant. The installed cost for the process is BD8 million, and 250,000 cars are painted each year. What is the simple payback period of the process?

3. What is the payback period and the IRR in the following cash flow:

Year end 0 1 2 3 4

Cash Flow -3,345 1,100 1,100 1,100 1,100

4. Best Flight Inc. is considering three mutually exclusive alternatives for implementing an automated passenger check-in counter at its hub airport. Each alternative meets the same service requirements, but difference in capital investment amounts and benefits exists among them. The study period is 10 years, and the useful lives of all three alternatives are also 10 years. Market values of all alternatives are assumed to be zero at the end of their useful lives. If the airlines MARR is 10% per year, which alternative should be selected in view of the cash-flow diagram shown below:

Alt A:

Year end 0 1-10 years

Cash Flow -390K 69k

Alt B

Year end 0 1-10 years

Cash Flow -920k 167k

Alt C

Year end 0 1-10 years

Cash Flow -660K 133.5k