Problem 4 Determine the Rate of Return for a road project that has an initial co

Question

Problem 4 Determine the Rate of Return for a road project that has an initial cost of $92,000 and would provide positive cash flows of $11,000 the first year, $13,000 the second year, $15,000 the third year, $17,000 the fourth year, $19,000 the fifth year, and $14,000 the sixth year Problem 5 The probabilities that the life of a car will vary from 5 to 12 years are given in the table below. The expected life of the machine is Life, Years Probabilit 5 6 10 12 0.14 0.25 0.26 0.12 0.30 0.20 015 0.05 Problem 6 A major water treatment purchase is being considered City of Cairo. The initial cost is determined to be $2,000,000. It is estimated that this new equipment will save $300,000 the first year and increase gradually by $50,000 for the next 6 years. MARR-15%, what is the Net Futur e Worth of this investment? Problem 7 Determine the better of the two alternatives using the present worth analysis. Use an interest rate of 10%. Alt.A Alt.B $11,500$7,900 Initial cost Annual benefit $6,800 $1,000 Salvage value $4,000 $7.900 Life in years 2 years 3 Years 1096 MARR

Explanation / Answer

4) Rate of return= average profit / average investment

Average profit= (11000+13000+15000+17000+19000+14000/6

= 14833.33

Rate of return= 14833.33 / 92000= 0.16= 16%

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