Required information Problem 05.028 DEPENDENT MULTI-PART PROBLEM-ASSIGN ALL PART

Question

Required information Problem 05.028 DEPENDENT MULTI-PART PROBLEM-ASSIGN ALL PARTS Parker Hannifin of Cleveland, Ohio, manufactures CNG fuel dispensers. It needs replacement equipment to streamline one of its production lines for a new contract, but it plans to sell the equipment at or before its expected life is reached at an estimated market value for used équipment Problem 05.028.a Future Worth Analysis Select between the two options using the corporate MARR of 15% per year and a future worth analysis for the expected use period os xpected Market Value ears

Explanation / Answer

FW1 = PW1*(F/P,I,N) PW1 is the present value of the cash flows Option D Years Cash flow Discount factor @ 15% Present Value 0 ($77,000) 1 ($77,000) 1 ($17,000) 0.869565 ($14,783) 2 ($17,000) 0.756144 ($12,854) 3 ($6,250) 0.657516 ($4,109) (17000)+10750 PW ($108,746.53) Using the F/P (15%,3) table we get , 1.5209 FW1 = -$108746.53*1.5209 ($165,392.59) Option E Years Cash flow Discount factor @ 15% Present Value 0 ($87,000) 1 ($87,000) 1 ($13,000) 0.869565 ($11,304) 2 ($13,000) 0.756144 ($9,830) 3 ($13,000) 0.657516 ($8,548) 4 ($13,000) 0.571753 ($7,433) 5 ($13,000) 0.497177 ($6,463) 6 ($1,250) 0.432328 ($540) (13000)+11750 PW ($131,118.43) Using the F/P (15%,6) table we get , 2.3131 FW1 = -$108746.53*1.5209 ($303,290.03) Option D should be selected as it has lower future cash outflow

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