Evaluate the following Cash Flows using the criteria, MARR and cash flows stated

Question

Evaluate the following Cash Flows using the criteria, MARR and cash flows stated in parts a-e . Parts a-d should use a 6-year time span. Indicate for each part whether the proposal should be accepted or rejected. Cash Flows in Year MARR 0 1 2 3 4 5 6 a Present Worth (PW) 6% ($80,000) $13,200 $19,800 $22,100 $25,000 $25,000 $20,000 b Future Worth (FW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 c Annual Worth (AW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 d Internal rate of Return (IRR) 12% ($127,500) $19,800 $29,700 $33,150 $37,500 $37,500 $30,000 e Discounted Payback by end of year 4 6% ($104,000) $22,000 $26,000 $30,000 $35,000 $35,000 $35,000 Evaluate the following Cash Flows using the criteria, MARR and cash flows stated in parts a-e . Parts a-d should use a 6-year time span. Indicate for each part whether the proposal should be accepted or rejected. Cash Flows in Year MARR 0 1 2 3 4 5 6 a Present Worth (PW) 6% ($80,000) $13,200 $19,800 $22,100 $25,000 $25,000 $20,000 b Future Worth (FW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 c Annual Worth (AW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 d Internal rate of Return (IRR) 12% ($127,500) $19,800 $29,700 $33,150 $37,500 $37,500 $30,000 e Discounted Payback by end of year 4 6% ($104,000) $22,000 $26,000 $30,000 $35,000 $35,000 $35,000

Explanation / Answer

Cash Flows in Year MARR 0 1 2 3 4 5 6 a Present Worth (PW) 6% ($80,000) $13,200 $19,800 $22,100 $25,000 $25,000 $20,000 PV ofcash flow entry -80000 12452.83 17621.93 18555.59 19802.34 18681.45 14099.21 NPV ---> 21213.353 NPV>0 Hence Accept b Future Worth (FW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 ($126,950) $29,387 $27,210 $25,194 $23,328 $21,600 $20,000 FW --- > $19,769 FW of cash flow >0 =>Hence, Accept c Annual Worth (AW) 8% ($80,000) $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 NPV ---> 12457.593 -80000 18518.52 17146.78 15876.64 14700.6 13611.66 12603.39 AW ----> $2,694.77 AW>0 => Hence Accept d Internal rate of Return (IRR) 12% ($127,500) $19,800 $29,700 $33,150 $37,500 $37,500 $30,000 PV ofcash flow entry -127500 17678.57 23676.66 23595.52 23831.93 21278.51 15198.93 IRR ---> 11.42% Reject since IRR Hence, Reject

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