Compare three projects: Write out your solution, by hand (except for the chart), in terms of Interest Factors then with equations/values then with the numerical value of the interest factor. Of course, once this is done for a given interest factor--e.g., (P/F,0.06,4)--you can go directly from interest factor to final value in subsequent calculations. Use an effective annual interest rate of 6%. You are encouraged to check your answers with Excel.

Create a single cash flow table for the three projects described below (4, 6, and 12 years, respectively). Also include 12 year cash flows for A and B. That is 6 columns, including End of Year.

Cash Type	Project A	Project B	Project Ca
Capital Cost, k$	30	40	64
Revenue, k$/yr	15	12	A + G (A =8 & G=1)
O&M, k$/yr	7	3	4
Salvage Value, k$	9	5	4
Lifetime, yr	4	6	12

^aProject C Revenue = 8,000 first year & increases 1,000/year thereafter (i.e., 8,000, 9,000, 10,000,...)

B. Determine the Present Worth of the three alternatives. Use 12 yr cash flows. (Partial Solution: Project A = $11,730)

C. Determine the Annual Cash Flow of each Project. Use the project lifetime cash flow table (but also use the 12 yr cash flow table for Project B to demonstrate that both give the same answer). (Partial Solution: Project B = $1,580)

D. Determine the Rate of Return (i*) of each project by 1st plotting present worth vs interest rate in Excel to obtain an approximate solution and 2nd using trial & error to determine your final answers to the tenth place. Use the equations from part B, but set them equal to zero and make the interest rate a variable. Include a single chart to present your PW vs I plots. Show the excel equation(s) you used to create the project A plot (Partial Solution: Project C = 8.6%)

E.Determine the undiscounted payback period for each project. Use the 12-year cash flows. Partial Solution: Project C = Year 9)

F. Determine the discounted payback period for each project. Use the 12-year cash flows. (Partial Solution: Project C = Year 11)

G. Which project has the maximum net benefit (Present or annual)? Which has the best return rate? The best discounted payback period? Why can these methods give different answers?