Question
Answer ASAP An engineer is choosing between three different alternatives for a machine component he needs to complete his biorefinery. He summarized the pertinent information
Answer ASAP
An engineer is choosing between three different alternatives for a machine component he needs to complete his biorefinery. He summarized the pertinent information about these alternatives in the tables below. Assume a study period of 8 years
Alternative | Investment Cost | Salvage Value | Useful Life | Depreciation Method |
A | 100,000 | 25,000 | 8 | Sum of the Years |
B | 70,000 | 20,000 | 4 | Straight Line |
C | 76,000 | 5,000 | 6 | Declining Balance |
The table below shows the projected net cash flows for each of the alternatives.
EOY | Alternative A | Alternative B | Alternative C |
1 | 30,000 | -20,000 | 30,000 |
2 | 40,000 | 40,000 | 30,000 |
3 | 50,000 | 50,000 | 30,000 |
4 | 60,000 | 8,000 | 30,000 |
5 | 70,000 | - | 30,000 |
6 | 80,000 | - | 30,000 |
7 | 90,000 | - | - |
8 | 100,000 | - | - |
Note: Please take note or a screenshot of the information presented here, this will be the basis of the succeeding questions. You will not be able to go back to this page.
Round all your answers to 2 decimal places, do not round intermediate solutions. For questions #7, 10, and 12, just type in the letter of the alternative.
1. What is the net cash flow for Alternative A on year 8?
2. What is the net cash flow for Alternative B on year 8?
3. What is the net cash flow for Alternative C on year 8?
Assuming a MARR of 10%, evaluate the three alternatives and recommend which among the three alternatives the engineer should invest in the PW method.
4. What is the PW of Alternative A?
5. What is the PW of Alternative B?
6. What is the PW of Alternative C?
7. Which of the three alternatives would you recommend based on the PW method?
Assuming a MARR of 12.5%, evaluate alternatives A and B and recommend which between the two alternatives the engineer should invest in using the FW method.
8. What is the FW of Alternative A?
9. What is the FW of Alternative B?
10. Which between the two alternatives would you recommend using the FW method?
Assuming a MARR of 8%, evaluate alternatives B and C and recommend which between the two alternatives the engineer should invest in using the AW method.
11. What is the AW of Alternative B?
12. Which between the two alternatives would you recommend using the AW method?
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