4 The product development group of a high-tech electronics company developed fiv

Question

4 The product development group of a high-tech electronics company developed five proposals for new The cash flows (in $1000 units) associated with each project are estimated. Which projects, if any, should the company accept on the basis of a present worth analysis? 10 points Rovenue, p The present worth of project A is$ The present worth of project B is $ The present worth of project C is ST- The present worth of project D is The present worth of project E is $ Project A is (Click to select) : Project B is Click to selec- Project C is Click to select ] Project D is (Click to Project E V (Click to select) References

Explanation / Answer

Project A:

Net revenue = Revenue - operating cost = $ 330

n = 3 years and MARR = 12%

PW = -400 + 330/1.12 + ... + (330 + 6)/1.123

PW = $ 396.88 (in thousands)

Project B:

Net revenue = Revenue - operating cost = $ 195

n = 10 years and MARR = 12%

PW = - 1300 + 195/1.12 + ... + (195 + 14)/1.1210

PW = - $ 193.7 (in thousands)

Project C:

Net revenue = Revenue - operating cost = $ 10

n = 5 years and MARR = 12%

PW = -700 + 10/1.12 + ... + (10 + 3)/1.125

PW = - $ 662.25 (in thousands)

Project D:

Net revenue = Revenue - operating cost = $ 360

n = 8 years and MARR = 12%

PW = -1500 + 360/1.12 + ... + (360 + 60)/1.128

PW = $ 312.58 (in thousands)

Project E:

Net revenue = Revenue - operating cost = $ 410

n = 4 years and MARR = 12%

PW = -1400 + 410/1.12 + ... + (410 + 95)/1.124

PW = - $ 94.31 (in thousands)

All positive PW projects would be accepted and the rest rejected:

Project A and D are accepted while Project B,C,E are rejected

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