(using Microsoft excel, Value design.) engineering economics book 15th edition A
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Question
(using Microsoft excel, Value design.) engineering economics book 15th edition
A piece of new equipment has been proposed by engineers at Youngblood Enterprises to increase the productivity of a certain manual welding operation. The investment cost is $225,000, and the equipment will have a market (salvage) value of $56,400 at the end of its expected life of 13 years. Increased productivity attributable to the equipment will amount to $68,435 per year after extra operating costs have been subtracted from the value of the additional production. Use a spreadsheet to evaluate the IRR of the proposed equipment. Is the investment a good one? The MARR is 18% per year, determine the following:
a.
Draw a CFD
b.
Calculate the PW(MARR) using the PW Method
c.
Calculate the AW(MARR) using the AW Method
d.
Create a CFT
e.
Evaluate Project Using Excel Formula
f.
Calculate IRR
g.
Create a Graphical Illustration of the IRR (Make sure the increments are in increments of 4% and thr range (0% to 64%). In addition, make sure the i' is represented on the the chart both on the x-axis and in a textbox on the chart)!
h.
Calculate the Simple Payback Period
i.
Calculate the Discounted Payback Period
j.
Create a Graphical Illustration of both the simple payback period and discounted payback periods.
k.
Is this project a good investment for Youngblood Enterprises; please explain your answer.
a.
Draw a CFD
b.
Calculate the PW(MARR) using the PW Method
c.
Calculate the AW(MARR) using the AW Method
d.
Create a CFT
e.
Evaluate Project Using Excel Formula
f.
Calculate IRR
g.
Create a Graphical Illustration of the IRR (Make sure the increments are in increments of 4% and thr range (0% to 64%). In addition, make sure the i' is represented on the the chart both on the x-axis and in a textbox on the chart)!
h.
Calculate the Simple Payback Period
i.
Calculate the Discounted Payback Period
j.
Create a Graphical Illustration of both the simple payback period and discounted payback periods.
k.
Is this project a good investment for Youngblood Enterprises; please explain your answer.
Explanation / Answer
Year Cah flows Discount factor @18% PW Discounted cash flows Cumulative Discount cash Flow for discountedpayback Discount factor @30% for IRR Cash flows at 30% 0 -225000 1 -225000 -225000 1 -225000 1 68435 0.8475 57995.8 -167004.2 0.7692 52642.31 2 68435 0.7182 49149.0 -117855.3 0.5917 40494.08 3 68435 0.6086 41651.7 -76203.6 0.4552 31149.29 4 68435 0.5158 35298.0 -40905.6 0.3501 23961 5 68435 0.4371 29913.6 -10992.1 0.2693 18431.54 6 68435 0.3704 25350.5 14358.4 0.2072 14178.1 7 68435 0.3139 21483.5 0.1594 10906.23 8 68435 0.2660 18206.3 0.1226 8389.411 9 68435 0.2255 15429.1 0.0943 6453.393 10 68435 0.1911 13075.5 0.0725 4964.148 11 68435 0.1619 11080.9 0.0558 3818.576 12 68435 0.1372 9390.6 0.0429 2937.366 13 68435 0.1163 7958.2 0.0330 2259.512 13 56400 0.1163 6558.6 0.0330 1862.154 Pw Ans B 117541.1 -2552.9 PW is 117541 at IRR PW is 0 so the % dicounting will be higher let say 30% IRR is approximate 30% as very less negative balance Ans F Payback period is =Investment/Annual cash Flow 225000/68435 3.288 Ans H Discounted payback= 5 year as last cumulative cash flow is negative+(10992.1/25350(cash flow after negative cash flow 5+(10992.1/24350) 5.451 Ans I Ans K Yes the project is good investment as it has greater Irr, PW is positive, payback and dicountedpayback period is also less
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