Problem 6-81 (algorithmic) Question Help For the following table, assume a MARR

Question

Problem 6-81 (algorithmic) Question Help For the following table, assume a MARR of 18% per year and a useful life for each alternative of eight years which equals the study period. The rank-order of alternatives from least capital investment to greatest capital investment is Z ? Y? W? X. Complete the incremental analysis by selecting the preferred alternative. "Do nothing" is not an option Capital investment -$250 -$400 $600 14 50 225 ?27 70 100 62 ? Annual cost savings A Market value 90 PW(18%) Click the icon to view the interest and annuity table for discrete compounding when i-18% per year. The PW of A (wxis(Round to the nearest dolar.)

Explanation / Answer

ANSWER:

we have i = 18% and n = 8 years

Pw of (w - x) = capital investment + cost savings(p/a,i,n) + market value(p/f,i,n)

pw of (w - x) = -600 + 14(p/a,18%,8) + 225(p/f,18%,8)

pw of (w - x) = -600 + 14 * 4.078 + 225 * 0.266

pw of (w - x) = -600 + 57.092 + 59.85 = -483.058 = -$483 ( rounded to nearest dollar).

so the present worth of (w -x) is -$483.

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