ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 35P
(a)
To determine
To construct:A choice table for interest tables from 0% to 100%
(a)
Expert Solution
Answer to Problem 35P
From table below, from 0% to 6%, Plan B should be preferred. Between 7% to 12% Plan C should be preferred. Beyond that Plan A should be selected
Explanation of Solution
NPV of Plan B
NPV of Plan C
Choice table for interest from 0% to 100%
| Interest rate | (P/A,i,15) | (P/F,i,15) | Plan A | Plan B | Plan C |
| 0% | 15.00 | 1.00 | 314,500 | 401,250 | 353,000 |
| 1% | 13.87 | 0.86 | 277,491 | 349,203 | 310,657 |
| 2% | 12.85 | 0.74 | 244,656 | 302,909 | 273,048 |
| 3% | 11.94 | 0.64 | 215,448 | 261,626 | 239,557 |
| 4% | 11.12 | 0.56 | 189,400 | 224,719 | 209,657 |
| 5% | 10.38 | 0.48 | 166,112 | 191,642 | 182,896 |
| 6% | 9.71 | 0.42 | 145,238 | 161,925 | 158,885 |
| 7% | 9.11 | 0.36 | 126,482 | 135,162 | 137,289 |
| 8% | 8.56 | 0.32 | 109,588 | 111,001 | 117,818 |
| 9% | 8.06 | 0.27 | 94,335 | 89,139 | 100,220 |
| 10% | 7.61 | 0.24 | 80,531 | 69,311 | 84,279 |
| 11% | 7.19 | 0.21 | 68,008 | 51,287 | 69,805 |
| 12% | 6.81 | 0.18 | 56,623 | 34,867 | 56,634 |
| 13% | 6.46 | 0.16 | 46,248 | 19,874 | 44,621 |
| 14% | 6.14 | 0.14 | 36,772 | 6,156 | 33,640 |
| 15% | 5.85 | 0.12 | 28,100 | (6,422) | 23,583 |
| 16% | 5.58 | 0.11 | 20,146 | (17,979) | 14,351 |
| 17% | 5.32 | 0.09 | 12,835 | (28,619) | 5,859 |
| 18% | 5.09 | 0.08 | 6,103 | (38,434) | (1,967) |
| 19% | 4.88 | 0.07 | (110) | (47,505) | (9,194) |
| 20% | 4.68 | 0.06 | (5,855) | (55,905) | (15,880) |
| 21% | 4.49 | 0.06 | (11,176) | (63,697) | (22,078) |
| 22% | 4.32 | 0.05 | (16,114) | (70,938) | (27,833) |
| 23% | 4.15 | 0.04 | (20,705) | (77,678) | (33,186) |
| 24% | 4.00 | 0.04 | (24,981) | (83,964) | (38,175) |
| 25% | 3.86 | 0.04 | (28,970) | (89,835) | (42,832) |
| 26% | 3.73 | 0.03 | (32,698) | (95,328) | (47,185) |
| 27% | 3.60 | 0.03 | (36,187) | (100,474) | (51,262) |
| 28% | 3.48 | 0.02 | (39,458) | (105,303) | (55,086) |
| 29% | 3.37 | 0.02 | (42,528) | (109,841) | (58,677) |
| 30% | 3.27 | 0.02 | (45,416) | (114,112) | (62,055) |
| 31% | 3.17 | 0.02 | (48,134) | (118,137) | (65,237) |
| 32% | 3.08 | 0.02 | (50,697) | (121,934) | (68,238) |
| 33% | 2.99 | 0.01 | (53,117) | (125,523) | (71,073) |
| 34% | 2.90 | 0.01 | (55,405) | (128,918) | (73,753) |
| 35% | 2.83 | 0.01 | (57,571) | (132,134) | (76,291) |
| 36% | 2.75 | 0.01 | (59,623) | (135,183) | (78,697) |
| 37% | 2.68 | 0.01 | (61,571) | (138,078) | (80,981) |
| 38% | 2.61 | 0.01 | (63,421) | (140,830) | (83,151) |
| 39% | 2.55 | 0.01 | (65,180) | (143,449) | (85,215) |
| 40% | 2.48 | 0.01 | (66,854) | (145,942) | (87,180) |
| 41% | 2.42 | 0.01 | (68,450) | (148,320) | (89,053) |
| 42% | 2.37 | 0.01 | (69,973) | (150,589) | (90,840) |
| 43% | 2.31 | 0.00 | (71,426) | (152,757) | (92,547) |
| 44% | 2.26 | 0.00 | (72,816) | (154,829) | (94,179) |
| 45% | 2.21 | 0.00 | (74,145) | (156,812) | (95,740) |
| 46% | 2.17 | 0.00 | (75,417) | (158,712) | (97,235) |
| 47% | 2.12 | 0.00 | (76,637) | (160,532) | (98,668) |
| 48% | 2.08 | 0.00 | (77,806) | (162,279) | (100,042) |
| 49% | 2.04 | 0.00 | (78,929) | (163,956) | (101,361) |
| 50% | 2.00 | 0.00 | (80,007) | (165,567) | (102,628) |
| 51% | 1.96 | 0.00 | (81,043) | (167,117) | (103,847) |
| 52% | 1.92 | 0.00 | (82,040) | (168,607) | (105,019) |
| 53% | 1.88 | 0.00 | (83,000) | (170,042) | (106,147) |
| 54% | 1.85 | 0.00 | (83,925) | (171,425) | (107,234) |
| 55% | 1.82 | 0.00 | (84,816) | (172,758) | (108,282) |
| 56% | 1.78 | 0.00 | (85,675) | (174,044) | (109,293) |
| 57% | 1.75 | 0.00 | (86,505) | (175,286) | (110,269) |
| 58% | 1.72 | 0.00 | (87,306) | (176,485) | (111,211) |
| 59% | 1.69 | 0.00 | (88,080) | (177,644) | (112,121) |
| 60% | 1.67 | 0.00 | (88,828) | (178,764) | (113,002) |
| 61% | 1.64 | 0.00 | (89,552) | (179,848) | (113,853) |
| 62% | 1.61 | 0.00 | (90,253) | (180,897) | (114,678) |
| 63% | 1.59 | 0.00 | (90,931) | (181,913) | (115,476) |
| 64% | 1.56 | 0.00 | (91,589) | (182,898) | (116,249) |
| 65% | 1.54 | 0.00 | (92,226) | (183,852) | (116,999) |
| 66% | 1.51 | 0.00 | (92,844) | (184,778) | (117,726) |
| 67% | 1.49 | 0.00 | (93,443) | (185,676) | (118,431) |
| 68% | 1.47 | 0.00 | (94,025) | (186,548) | (119,116) |
| 69% | 1.45 | 0.00 | (94,590) | (187,394) | (119,781) |
| 70% | 1.43 | 0.00 | (95,139) | (188,217) | (120,427) |
| 71% | 1.41 | 0.00 | (95,672) | (189,016) | (121,054) |
| 72% | 1.39 | 0.00 | (96,191) | (189,793) | (121,665) |
| 73% | 1.37 | 0.00 | (96,695) | (190,549) | (122,258) |
| 74% | 1.35 | 0.00 | (97,186) | (191,285) | (122,836) |
| 75% | 1.33 | 0.00 | (97,663) | (192,001) | (123,398) |
| 76% | 1.32 | 0.00 | (98,128) | (192,698) | (123,946) |
| 77% | 1.30 | 0.00 | (98,581) | (193,377) | (124,479) |
| 78% | 1.28 | 0.00 | (99,023) | (194,039) | (124,998) |
| 79% | 1.27 | 0.00 | (99,453) | (194,684) | (125,505) |
| 80% | 1.25 | 0.00 | (99,872) | (195,312) | (125,998) |
| 81% | 1.23 | 0.00 | (100,282) | (195,926) | (126,480) |
| 82% | 1.22 | 0.00 | (100,681) | (196,524) | (126,950) |
| 83% | 1.20 | 0.00 | (101,070) | (197,108) | (127,408) |
| 84% | 1.19 | 0.00 | (101,450) | (197,678) | (127,856) |
| 85% | 1.18 | 0.00 | (101,822) | (198,235) | (128,293) |
| 86% | 1.16 | 0.00 | (102,184) | (198,779) | (128,720) |
| 87% | 1.15 | 0.00 | (102,539) | (199,310) | (129,137) |
| 88% | 1.14 | 0.00 | (102,885) | (199,829) | (129,544) |
| 89% | 1.12 | 0.00 | (103,223) | (200,337) | (129,943) |
| 90% | 1.11 | 0.00 | (103,554) | (200,833) | (130,332) |
| 91% | 1.10 | 0.00 | (103,878) | (201,318) | (130,713) |
| 92% | 1.09 | 0.00 | (104,194) | (201,793) | (131,086) |
| 93% | 1.08 | 0.00 | (104,504) | (202,258) | (131,451) |
| 94% | 1.06 | 0.00 | (104,807) | (202,712) | (131,808) |
| 95% | 1.05 | 0.00 | (105,104) | (203,158) | (132,157) |
| 96% | 1.04 | 0.00 | (105,395) | (203,593) | (132,499) |
| 97% | 1.03 | 0.00 | (105,680) | (204,020) | (132,834) |
| 98% | 1.02 | 0.00 | (105,958) | (204,438) | (133,163) |
| 99% | 1.01 | 0.00 | (106,232) | (204,848) | (133,484) |
| 100% | 1.00 | 0.00 | (106,499) | (205,250) | (133,799) |
(b)
To determine
To select:the best alternative at expected
(b)
Expert Solution
Answer to Problem 35P
Best alternative at expected rate of return of 10%isPlan A having highest NPV of $84,279.
Explanation of Solution
As per the choice table above, at expected rate of return of 10% Plan C has highest NPV of $84,279 as compared to other plans; hence Plan C should be preferred.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
A road can be paved with either asphalt or concrete. Concrete costs $20,000/mile and lasts for 20 years. What is the maximum that should be spent on asphalt, which lasts only 10 years? The annual maintenance costs are $500/mile for both pavements. The cost of money = 8%.
A factory installs new machinery that saves S(x) = 1800
dollars per year.
y
$ per year
1800
savings
S=1800- 80 x
net
savings
cost
C = 100 x
Year
80x dollars per year, where x is the number of years since installation. However, the cost of maintaining the new machinery is C(x) : = 100x
X
(a) Find the year x at which the maintenance cost C(x) will equal the savings S(x). (At this time, the new machinery should be replaced. Round your answer to the nearest whole number.)
X =
years
(b) Find the accumulated net savings (in dollars) [savings S(x) minus cost C(x)] during the period from t = 0 to the replacement time found in part (a). (Round your answer to the nearest whole
number.)
Assume you are 25 years old and you are professionally employed. You are approached by two investment providers.
Investment provider A guarantees you an annual payment of 325000 Rand (at current value) post retirement age of 65, increasing at a rate of 5% for 20 years after retirement age.
Investment provider B guarantees you an annual payment of 375000 Rand (at current value) post retirement age of 65, increasing at a rate of 5% for 15 years after retirement age.
Note: First payout is at age 66. Assume average annual inflation pre-retirement and post-retirement to be 7% and average investment growth to be 9%.
Calculate the annual payments that need to be paid to the investment providers.
Chapter 8 Solutions
ENGR.ECONOMIC ANALYSIS
Ch. 8 - Prob. 1QTCCh. 8 - Prob. 2QTCCh. 8 - Prob. 3QTCCh. 8 - Prob. 4QTCCh. 8 - Prob. 5QTCCh. 8 - Prob. 1PCh. 8 - Prob. 2PCh. 8 - Prob. 3PCh. 8 - Prob. 4PCh. 8 - Prob. 5P
Ch. 8 - Prob. 6PCh. 8 - Prob. 7PCh. 8 - Prob. 8PCh. 8 - Prob. 9PCh. 8 - Prob. 10PCh. 8 - Prob. 11PCh. 8 - Prob. 12PCh. 8 - Prob. 13PCh. 8 - Prob. 14PCh. 8 - Prob. 15PCh. 8 - Prob. 16PCh. 8 - Prob. 17PCh. 8 - Prob. 18PCh. 8 - Prob. 19PCh. 8 - Prob. 20PCh. 8 - Prob. 21PCh. 8 - Prob. 22PCh. 8 - Prob. 23PCh. 8 - Prob. 24PCh. 8 - Prob. 25PCh. 8 - Prob. 26PCh. 8 - Prob. 27PCh. 8 - Prob. 28PCh. 8 - Prob. 29PCh. 8 - Prob. 30PCh. 8 - Prob. 31PCh. 8 - Prob. 32PCh. 8 - Prob. 33PCh. 8 - Prob. 34PCh. 8 - Prob. 35PCh. 8 - Prob. 36PCh. 8 - Prob. 37PCh. 8 - Prob. 38PCh. 8 - Prob. 39PCh. 8 - Prob. 40PCh. 8 - Prob. 41PCh. 8 - Prob. 42PCh. 8 - Prob. 43PCh. 8 - Prob. 44PCh. 8 - Prob. 45P
Knowledge Booster
Similar questions
- Pls help with below homework Please select the correct option.arrow_forwardIf the interest rate is R = 0.10, (approximately) what is the Present Value of $79.20 to be received one year from today? Group of answer choices A) None of the other options. B) $71.28 C) $72 D) $72.90 E) $70.20arrow_forwardABC university tuition fees can be paid by on-time payment (pay total amount due when classes start at the cost of 90,000 pesos per year) or early-bird payment (pay total amount due 1 year in advance with a 10% discount). What is the amount of the savings compared to the on-time payment at the time that the on-time payment is made?arrow_forward
- Suppose you started a savings account and put $70 in the bank and left it there for 1 year. Also assume you put no other money in that account. If the annual interest rate is R = 0.05 (5%), then at the end of the year you would have how much in your account at the end of the year? Group of answer choices A) $73.50 B) $70.50 C) none of the other options. D) $75 E) $72.80arrow_forwardPrecision Engineering Factory consumes 50,000 units of a component per year. The ordering, receiving and handling costs are Rs 3 per order while the trucking costs are Rs 12 per order. Further details are as follows: deterioration and obsolescence cost Rs 0.004 per unit per year; interest cost Re 0.06 per unit per year; storage cost Rs 1,000 per year for 50,000 units. Calculate the economic order quality.arrow_forwardIf APC is 0.75 and MPC is 1, how much will be APS.arrow_forward
- An oil company plans to purchase a piece of vacant land on the corner of two busy streets for $50,000. On properties of this type, the company installs businesses of three different types. Each has an estimated useful life of 15 years. The salvage land for each is estimated to be the $50,000 land cost. Cost* $ 83,000 Type of Business Conventional gas station Add automatic carwash Add quick carwash 195,000 115,000 *Improvements cost does not include $50,000 for the land. Plan A B с Net Annual Income $26,500 39,750 31,200 (a) Construct a choice table for interest rates from 0% to 100%. (b) If the oil company expects a 10% rate of return on its investments, which plan (if any) should be selected?arrow_forwardAn analyst gathers the following information about the performance of a portfolio (S millions). The portfolio's annual time-weighted rate of return is closest to: A) 32% B)27% C) 8% Quarter Value at Beginning of Quarter Cash Inflow (Outfiow) at beginning of Quarter Value at end of quarter 1 2.0 0.2 2.4 2 2.4 0.4 2.6 3 2.6 (0.2) 3.2 4 3.2 1.0 4.1arrow_forwardA firm is must choose to buy the GSU-3300 or the UGA-3000. Both machines make the firm’s production process more efficient which in turn increases incremental cash flows. The GSU-3300 produces incremental cash flows of $24,998.00 per year for 8 years and costs $99,590.00. The UGA-3000 produces incremental cash flows of $29,475.00 per year for 9 years and cost $126,038.00. The firm’s WACC is 8.32%. What is the equivalent annual annuity of the GSU-3300? Assume that there are no taxes.arrow_forward
- A company manufactures dog leashes that sell for $20.97, including shipping and handling. The monthly fixed costs (advertising, rent, etc.) are $23,202 and the variable costs (materials, shipping, etc.) are $9.21 per leash. How many leashes must be produced and sold each month for the company to break even?arrow_forwardA new Wave soldering machine is expected to save Fast Circuit Boards 11,500 per year through a reduction of labour costs and increased quality. The machine has an expected life of 8 years, with zero salvage value after that time. The company can expect to get a 10 percent return on any investment. Determine the maximum price that they can afford to pay for the machine up front? Machine Costarrow_forwardProblem 2: Select one of the following two plans using the present worth method. Given i= 20% per year. 1st Cost ($) Life (years) Salvage value ($) Annual Cost ($) Plan 1 25,000 10 5,000 6,000 Plan 2 50,000 20 0 2,500arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education