Last Name: NOTE: Show your works clearly and underline answer Solve the followin

Question

Last Name: NOTE: Show your works clearly and underline answer Solve the following problems at the annual interest rate 5%. Initial Cost Annual costs Annual benefit Useful lives 3 years Salvage $70,000 5,000 18,000 of all costs) amysis period is 6 years. Consider the salvage at the end of useful life a benefit. (15 period is 9 years. Consider the salvage at the 1D) Calculate the Net Present Worth (present worth of all benefits minus present worth o points) 2) Calculate the Net Equivalent Uniform Annual Benefit (equivalent uniform annual benefit equivalent uniform annual cost) when the analysis end of useful life a benefit. (15 points)

Explanation / Answer

PART - A

(1) In the year - 3 ------> we have regular annual cash flow of 13000 + salvage of 30000 but deducted with 70,000 for new investment needed to continue the project for another 3 years.

Thus we have 13000 + 30000 - 70000 = - 27000. in the year - 3. But for year - 6 we have only 13000 + 30000

(2) Annual CF = 18000 - 5000 = 13000.

(3) DF = discounting factors = 1/1.05 = .........contiinue to press "=" to get subsequent year cash flows.

PART - B

Year CF DF PV 0 -70000 1 -70000 1 13000 0.952381 12380.95 2 13000 0.907029 11791.38 3 -27000 0.863838 -23323.6 4 13000 0.822702 10695.13 5 13000 0.783526 10185.84 6 43000 0.746215 32087.26          NPV    = -16183

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