3. Two years ago, an agricultural engineer invested 100000$ an bought a land to
ID: 1131320 • Letter: 3
Question
3. Two years ago, an agricultural engineer invested 100000$ an bought a land to establish a farm. He made his project and during the last two ° One year ago he ordered necessary machines and made 10000$ . Today he received the machines and started to run the farm and paid years he invested for the buildings 15000s/year. advanced payments 25000S to the machines and one year later another 25000$ payment and clear the machine invoice. e engineer expects 75000$ annual revenue from the project He is planning the annual expences will be 15000S/year The engineer expects 20000$ from the salvage of the machines after five years of operation. If the MARR of the agricultural engineer is 20% calculate whether this project is acceptable. Use PW method. (40 points) . .Explanation / Answer
Answer
PW of $100000 invested 10 years ago = 100000*1.2^10= 619173.6
PW of investment done in building 2 years ago = 15000*1.2^2=15000*1.44=21600
PW of investment made for investment in machines = 10000*1.2=120000
Amount paid for machine today = 25000
PW of Amount to be paid next year = 25000/1.2=20800
PW of revenue = 75000*A=75000*3=225000
A=(1/1.2+(1/1.2)^2+(1/1.2)^3+(1/1.2)^4+(1/1.2)^5)=/2..99
PW of Annual cost =15000×A
PW of net annual revenue = 60000×A=60000×3=180000
PW of salvage value = 20000/1.2^5=20000*0.41=8200
PW = benwfit-cost
=-619174-336000-45800+180000+8200=-1000974+188200=-812774
PW is negative hence can't be accepted
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