Question 11.15 for reference only ....Which of the two projects whose cashflow d

Question

Question 11.15 for reference only....Which of the two projects whose cashflow diagrams are given in Fig. 11.4 should be selected on the basis of the PW criterion if the annual interest rate is 9% compounded yearly? Does the decision change under FW and AW criteria?

Figure 11.4 for reference only....

(a)

(b)

Question 3 (actual question to be answered)

a) (From Problem 11.15) What is the present worth of the first project (a) in Figure 11.4 on page 288? Assume that the annual interest rate, i, = 9%.

b) (From Problem 11.15) What is the present worth of the second project (b) in Figure 11.4 on page 288? Assume that the annual interest rate, i, = 9%.

c) (Based on 11.15) Comparing the answers from the previous two questions, which project should be selected based upon the present worth method?

Answer a.

Project A.

b.

Project B.

c.

It depends on the project life.

d.

Neither one.

(+) cashflow 4,500 ........ 4,500 ......... 4,500 year 0 1 2 3 4 5 (-) cashflow 9,000

Explanation / Answer

Answer for question no.3a):

Answer for question no.b:

Answer for question no.3.c):

As the present worth of project A is more than the present worth of Project B, Project A should be accepted.

Answer is option a, Project A.

Year Particulars Discount factor @9% Present worth 0 -$9,000.00 1 -$9,000.00 1 $4,500.00 0.917431193 $4,128.44 2 0.841679993 $0.00 3 $4,500.00 0.77218348 $3,474.83 4 0.708425211 $0.00 5 $4,500.00 0.649931386 $2,924.69 Total $1,527.96

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.