Evaluate the following Cash Flows using the criteria, MARR and cash flows stated

Question

Evaluate the following Cash Flows using the criteria, MARR and cash flows stated in parts a-e . Parts a-d should use a 6-year time span. Indicate for each part whether the proposal should be accepted or rejected. Each part is separate and only the listed criterion value and decision are needed for each part.

Cash Flows in Year

MARR

0

1

2

3

4

5

6

a

Present Worth (PW)

6%

($80,000)

$13,200

$19,800

$22,100

$25,000

$25,000

$20,000

b

Future Worth (FW)

8%

($80,000)

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

c

Annual Worth (AW)

8%

($80,000)

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

d

Internal rate of Return (IRR)

12%

($127,500)

$19,800

$29,700

$33,150

$37,500

$37,500

$30,000

e

Discounted Payback by end of year 4

6%

($104,000)

$22,000

$26,000

$30,000

$35,000

$35,000

$35,000

Cash Flows in Year

MARR

0

1

2

3

4

5

6

a

Present Worth (PW)

6%

($80,000)

$13,200

$19,800

$22,100

$25,000

$25,000

$20,000

b

Future Worth (FW)

8%

($80,000)

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

c

Annual Worth (AW)

8%

($80,000)

$20,000

$20,000

$20,000

$20,000

$20,000

$20,000

d

Internal rate of Return (IRR)

12%

($127,500)

$19,800

$29,700

$33,150

$37,500

$37,500

$30,000

e

Discounted Payback by end of year 4

6%

($104,000)

$22,000

$26,000

$30,000

$35,000

$35,000

$35,000

Explanation / Answer

Cash Flows in Year MARR 0 1 2 3 4 5 6 a Present Worth (PW) 6% ($80,000) $13,200 $19,800 $22,100 $25,000 $25,000 $20,000 PV ofcash flow entry -80000 12452.83 17621.93 18555.59 19802.34 18681.45 14099.21 NPV ---> 21213.353 NPV>0 Hence Accept b Future Worth (FW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 ($126,950) $29,387 $27,210 $25,194 $23,328 $21,600 $20,000 FW --- > $19,769 FW of cash flow >0 =>Hence, Accept c Annual Worth (AW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 NPV ---> 12457.593 -80000 18518.52 17146.78 15876.64 14700.6 13611.66 12603.39 AW ----> $2,694.77 AW>0 => Hence Accept d Internal rate of Return (IRR) 12% ($127,500) $19,800 $29,700 $33,150 $37,500 $37,500 $30,000 PV ofcash flow entry -127500 17678.57 23676.66 23595.52 23831.93 21278.51 15198.93 IRR ---> 11.42% Reject since IRR Hence, Reject

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