Exam 4: Comparison Methods: Part I

A project requires $10 000 as initial investment and will earn a revenue of $2 000 per year over the next seven years. The interest rate is 5.0% per year. What is the present worth of the project's costs?

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Question 1

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The present worth of a 4-year project is $145 million. It has a first cost of $76.8 million, annual savings and operating costs, and salvage value of $44 million at the end of its service life. What is the project's annual net savings if its MARR is 4%?

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Question 2

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Present worth of the project can be written as -76.8 + X * (P/A, 4%, 4)+ 44 * (P/F, 4%, 4)= 145 where X is annual net savings equal to the difference between annual savings and annual operating costs. Solving for X, we find that annual net savings are $50.742 million

Suppose that cash flows of a project are given as follows: What is the project's payback period?

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Question 3

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It is possible to summarize all calculations in the following table:
The payback period is 5 years, when net savings offset the first cost.

A project is marginally acceptable if

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Question 4

For two mutually exclusive projects with equal lives, the one with

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Question 5

A project requires $10 000 as initial investment and will earn a revenue of $3 000 per year over the next five years. Annual interest rate is 5.4%. What is the present worth of the project's benefits?

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Question 6

Jim is considering new software to design web pages. Currently there are three brands on the market: SUMY, ROVNO and PSEL. Based on the software manuals, Jim evaluated his productivity in terms of pages designed per year and put this information in a table: If Jim receives $10 per page designed, evaluate these alternatives in terms of their payback period.

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Question 7

Suppose that cash flows of a project are given as follows: It is known that MARR is 10%. What is the project's payback period?

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Question 8

Two projects are mutually exclusive if

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Question 9

If project A has present worth of -$27 000 and project B has present worth of -$26 000, then

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Question 10

MJ Consulting is doing a feasibility study on a new technological line to produce shoes. Experts identified three mutually exclusive alternatives. Information on all of them is presented in the following table: If the price of a pair of shoes is $100, the annual interest rate is 7% and service life is 5 years for all alternatives, which one is the best?

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Question 11

Mutually exclusive projects can be compared in terms of present worth if

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Question 12

For an independent project to be accepted

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Question 13

Annual worth comparison method

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Question 14

Explain when the repeated lives comparison method should be applied and how it works.

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Question 15

I spend $60 per month on bus fares to work. One day I decide to buy a mountain bike for $1680 and to ride to work instead. Assuming I work 12 months in a year, and my MARR is 1% per month, compounded monthly, what is the discounted payback time for this investment?

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Question 16

An investor wants to invest in the trucking business. To run this business, 10 trucks should be acquired. The market price of a truck is $50 000. It is also necessary to pay $390 000 per year as wages to the truck drivers. Vehicle repair and maintenance costs are $10 000 per year. What is the annual worth of the project's costs at 5% MARR over a 10-year period?

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Question 17

For the purpose of comparison, what alternative should be used in assessing an independent project?

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Question 18

How is the study period comparison method different from the repeated lives comparison method?

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Question 19

I can buy a Grapefruit laptop computer for $3 000, or a Doors laptop for $2 500. The Grapefruit has an expected life of five years, whereas the Doors is only expected to last four years. Both provide equivalent service. A four-year-old Grapefruit has a salvage value of $200. If my MARR is 10%, what is the present cost of choosing the Grapefruit over the Doors?

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Question 20

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A project requires $10 000 as initial investment and will earn a revenue of $2 000 per year over the next seven years. The interest rate is 5.0% per year. What is the present worth of the project's costs?

The present worth of a 4-year project is $145 million. It has a first cost of $76.8 million, annual savings and operating costs, and salvage value of $44 million at the end of its service life. What is the project's annual net savings if its MARR is 4%?

Suppose that cash flows of a project are given as follows: What is the project's payback period?

A project is marginally acceptable if

For two mutually exclusive projects with equal lives, the one with

A project requires $10 000 as initial investment and will earn a revenue of $3 000 per year over the next five years. Annual interest rate is 5.4%. What is the present worth of the project's benefits?

Suppose that cash flows of a project are given as follows: It is known that MARR is 10%. What is the project's payback period?

Two projects are mutually exclusive if

If project A has present worth of -$27 000 and project B has present worth of -$26 000, then

Mutually exclusive projects can be compared in terms of present worth if

For an independent project to be accepted

Annual worth comparison method

Explain when the repeated lives comparison method should be applied and how it works.

I spend $60 per month on bus fares to work. One day I decide to buy a mountain bike for $1680 and to ride to work instead. Assuming I work 12 months in a year, and my MARR is 1% per month, compounded monthly, what is the discounted payback time for this investment?

For the purpose of comparison, what alternative should be used in assessing an independent project?

How is the study period comparison method different from the repeated lives comparison method?

Engineering Decision Making

Time Value of Money

Cash Flow Analysis

Comparison Methods: Part Ii

Financial Accounting and Business Plans

Replacement Decisions

Taxes

Inflation

Public Sector Decision Making

Project Management

Dealing With Uncertainty and Risk

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