Would you be able to solve parts A-C? I\'m unsure of how to get any of them with
ID: 1190945 • Letter: W
Question
Would you be able to solve parts A-C? I'm unsure of how to get any of them with these numbers. I am an engineering econ student. This is problem 5-55 from Engineering Economy 16th ed. by Sullivan. Thanks!
The International Parcel Service has installed a new radio frequency identification system to help reduce the number of packages that are incorrectly delivered. The capital investment in the system is S65,000, and the projected annual savings are tabled below. The system's market value at the EOY e is negligible, and the MAR s 20% per year. a. What is the FW of this investment b. What is the IRR of the system? c.What is the discounted payback period for this investment? End of Year Savings $27,000 32,000 32,000 41,000 48,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 20% per year The FW of this invesmentound to the nearest dollar) a. The FW of this investment is S.(Round to the nearest dollar.)Explanation / Answer
Initial Investment = 65,000
Net Cash inflows at 20%
Year
Savings
PVF@20%
PV
1
$ 27,000.00
0.83
$ 22,500.00
2
$ 32,000.00
0.69
$ 22,222.22
3
$ 32,000.00
0.58
$ 18,518.52
4
$ 41,000.00
0.48
$ 19,772.38
5
$ 48,000.00
0.40
$ 19,290.12
$ 102,303.24
FW of investments = Inflow- outflow = 102,303.24-65,000= $37,303.24
B. At IRR,
Cash inflows = cash outflows
=>By using trial and error at 41% cash outflows are equal to cashinflow
therefore, IRR = 41%
C.
Year
Savings
PVF@20%
PV
Cumulative
1
$ 27,000.00
0.83
$ 22,500.00
22,500.00
2
$ 32,000.00
0.69
$ 22,222.22
44,722.22
3
$ 32,000.00
0.58
$ 18,518.52
63,240.74
4
$ 41,000.00
0.48
$ 19,772.38
83,013.12
5
$ 48,000.00
0.40
$ 19,290.12
102,303.24
$ 102,303.24
Discounted pay back period is 3rd Yr+(65000-63240.74)/19772.38
= 3rd year +0.08898 = 3.088 yrs
Year
Savings
PVF@20%
PV
1
$ 27,000.00
0.83
$ 22,500.00
2
$ 32,000.00
0.69
$ 22,222.22
3
$ 32,000.00
0.58
$ 18,518.52
4
$ 41,000.00
0.48
$ 19,772.38
5
$ 48,000.00
0.40
$ 19,290.12
$ 102,303.24
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