DETAILS First Cost(s) Economic Life (years) Annual Revenues (S) Questions 16 to 24 PROJECTA PROJECT B 60,000 90,000 5 10 30,000 30,000 9,000 in the first year followed by 10,000 annual decreases of $500 (e.g. 8,500 in year 2; 8,000 in year 2, etc.) 1,000 -2,000 10 10 Annual operating cost (5) Salvage Value (5) MARR (%) 16. Project A's Annual Equivalent Worth can be calculated from answer 60.000 PIA 10% 5) + 30.000 -10.000 1.0001PF 10%.5) b) -60.000 + 30.000 - 10.000 1.000(P/F 10%.5) C1-60.000/AP.10%.5) + 30.000 -10.000 1,000/AF, 10%.5) di 60.000 + 30.000 - 10.000 + 1,000 .) None of these answers Project A's Present Worth can be calculated from answer a)-60.000 PIA 10%.5) 30.000 - 10.000 + 1.000P/F 10%.5) b) -60.000(AP.10%.5) + (30.000 - 10.000 PIA 10%.5) - 1.000[P/F 10%.5) c)-60.000 + (30.000 - 10.000) + 1.000(PF 10%.51 -60.000 (30,000 - 10.000 (PIA. 10%.). 1.000[P/F 10%.5) None of these answers 18. Project A's Internal Rate of Return (I) can be calculated from answer a)-50.000(AP. X.5) + (30.000 - 10.000 1.000(AF/8.5) - $0 b) -60.000 + 30,000 -10,000 + 1,000[P/F - 50 0-60.000 + (30.000-10.000 (PIA.S) 1,000[PF.1.5) - S0 0-60.000/F/P...5) (30,000 -10.000 FIAT 5) +1.000 - 50 Answers a), c) and 19. Project A's External Rate of Return (") can be calculated from answer a)-60.000 PIA 10%.5) + 30,000 -10.000 + 1,000P/F 10%.5) - 90 D) -60.000F/P.1%.5) + (30.000 - 10.000/F/A. 104.5) 1,000 - 50 c)-80.000 + (30.000 - 10.0001P/F74.5) + 1,000PF 10%.5) = 50 60.000F/P.7%.5)+(30.000 -10.000 PIA,10%) +1,000 - $0 . None of these answers 20 the average recovery period for projects similar to Project A is 4 years, would Project A be acceptable based on the Simple Payback Method? Page 1 a) Yes bj No Need for information to comment on Project A's validity 21. Project B's Net Future Worth can be calculated from answer a) -90.000 PIA 10% 10+21.000-2.000 P/F 10%10) + 500P/G.10% 10) b) -90.000UFIP 10% 10)-2.000 21.000(FIA 10% 101.500(FIG.10%10) c) 90.000/F/P.10% 10)-2.000 + 21,000(FIA 10% 10) - 500/F/G 10%10) 0-90.000-2.000/P/F 10%.10) 21,000/P/A 10%.10) 500P/G.10%,10) e) None of these answers 22 A friend claims that Project B's Internal Rate of Return (IRR) can be calculated from any of the following equations: A-90,000/FP7.10)-21.000FIA.1,10-2,000+5001F/G./ 10) = 30 B. -90,000 21.000 PIA.I.10-2.000 P/F.1.10)+500P/G.1.10) - S0 C.-90.000/AP.I.10)21.000-2.000(AF.1.10) 500/A/G./.10) - $0 Your view is that a) Project B'SIRR can be calculated from equation A but not equations Band b) Project BIRR can be calculated from equations A and C but not equation 8 c) Project B's IAR can be calculated from equation Conly. di Your friends meet