Preblem 2(20 pts) - Given three alternatives A, B and C in the table below with

Question

Preblem 2(20 pts) - Given three alternatives A, B and C in the table below with infinite analysis period Initial cost Annual benefit | $800 | $200 | $180 Salvage value S500 9000 Life in years 2 years 3 Years Infinity S1500 $900 1200 MARR Marginal Attractive rate of return Using present worth analysis method, determine the following: (a) The NPW (Net Present Worth) of alt. A is A. S1,342 B. $1,738 C.$1,100 D $600 (b) The NPW (Net Present Worth) of alt. B is A. $1,342 B. $1,738 C. $1,100 D S600 (c) The NPW (Net Present Worth) of alt. C is A. $1,342 B. S1,738 C. $1,100 D $600 (d) The best alternative among the three alternatives using the PW analysis is A. Alt. A B. Alt. B C. Alt. C D. Either alt. B or alt.

Explanation / Answer

Net present value/worth is the present value of all cashflows of a project/ plan/ investment etc to evaluate it's feasibility or profitability.

So

Present values Factors for 10% MARR

You can simply get it using (1+r)-n where r is rate and n is the period

Now, Alternative A

NPW = (-1500)*1 + 800(0.9091+0.8264) + 500(0.8264) = $301.6

a.)$301.6

Alternative B

NPW = (-900)*1 + 200(0.9091+0.8264+0.7513) +900*0.7513 = 1173.53 - 900 = $273.53

b.)$273.53

Alternative C

NPW = (-1200)*1 + 180/0.10 = 1800 - 1200 = $600

c.)$600

d.)Based on the given MARR, it is Alternative C

Year PV Factor 0 1 1 0.9091 2 0.8264 3 0.7513

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