Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 43

Shadowland, a manufacturer of air-freightable pet crates, has identified two projects that, though hav­ing a relatively high risk, are expected to move the company into new revenue markets. Utilize a spreadsheet solution to
a) select any combination of the projects if the MARR is equal to the after­tax WACC and b) determine if the same projects should be selected if the risk factors are enough to require an additional 2% per year for the invest­ment to be made. Financing will be developed using a D-E mix of 60-40 with equity funds costing 7.5% per year. Debt financing will be developed from $10,000, 5% per year, paid quarterly, 10-year bonds. The ef­fective tax rate is 30% per year.