A company that makes food-friendly silicone (for use in cooking and baking pan c
ID: 1138326 • Letter: A
Question
A company that makes food-friendly silicone (for use in cooking and baking pan coatings) is considering the independent projects shown, all of which can be viable for only 10 years. If the company’s MARR is 11% per year, determine which should be selected on the basis of a present worth analysis. The financial values are in $1000 units.
The present worth of project A is determined to be $ .
The present worth of project B is determined to be $ .
The present worth of project C is determined to be $ .
The present worth of project D is determined to be $ .
A B C D First Cost $-800 $-2,400 $-7,000 $-8,000 Annual Net Income, per Year $175 $375 $2000 $2000 Salvage Value $6 $4 $7 $7Explanation / Answer
Answer
Working in thousand values
PW=-cost+A(P|A,i,n)+F*(P|F,i,n)
A=net annual benefit
F=salvage value
project A
PW=-800+175*(P|A,11,10)+6*(P|F,11,10)
=-800+175*5.889232+6*0.352184478
=232.728707
Project B
PW=-2400+375*5.889232+4*0.352184478
=-190.129262
Project C
PW=-7000+2000*5.889232+7*0.352184478
=4780.92929
Project D
PW=-8000+2000*5.889232+7*0.352184478
=3780.92929
The project C should be selected as it has the highest present worth.
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