3. Financial da d at the end of the table below. Assume that alternatives are re

Question

3. Financial da d at the end of the table below. Assume that alternatives are replace their useful lives. MARR = 8% Data Initial Cost $5,000 $1OO0$2,50o Uniform Annual | $650 | Benefits 350 Salvage Value $5,00o $1,760 $2,000 Useful Life in 20 Years 5 10 a. Find the EUAC of alternative P b. Find the EUAB of alternative R 4. Determine the internal rate of return for an equipment that costs $150,000 and would provide positive cash flows of $60,000, $ 50,000, $ 40,000, and 40,000 at the end of each year for the next four years

Explanation / Answer

Answer

A) EUAC of alternative P is

=  5,000(A/P, 8%,20) - 5000(A/F, 8%,20)

= 5000* 0.1019 - 5000* 0.0219

= 509.5- 109.5

= $400

b)  EUAC = 2,500 (A/P, 8%, 10) - 2,000(A/F, 8%, 10)

= 2,500 * 0.1490 - 2,000 * 0.0690

=372.5 - 138

= 234.5

(4)

year cash outlay cash inflow 0 150000 1 60000 2 50000 3 40000 4 40000 190000 average of cash inflow 47500 annuity factors 3.157895 this will fall between rate of 10 and 12 % year cash inflow 10% 11% PV @ 10% PV @ 12% 1 60000 0.909 0.892 54540 53520 2 50000 0.826 0.797 41300 39850 3 40000 0.751 0.711 30040 28440 4 40000 0.683 0.635 27320 25400 153200 147210 LDR+ ( P1-cash outflow ) / (P1-P2) * (HDR-LDR) 10+ (153200-150000 )/ (153200-147210)* (12-10) 11.06845

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