how to do it without excel Quying the a Sadri, and hani, Saeid Sadri. nute of Te

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how to do it without excel

Quying the a Sadri, and hani, Saeid Sadri. nute of Technolo needs a new irrigan 5145,000, have anni and need an overhan $30,000. System two e costs of $5000 with ereafter. System two . Both systems will 6-37 e years. If Hinson's nual worth analysis s should be willing ted by Ed Wheeler. many miles must each salesperson drive each year If8% interest is u for it to be economically best for the firm to provide around the lake e the cars? Assume a 10% annual interest rate. Use an annual cash flow analysis. 6-40 An oil refinery The town of Dry Gulch needs more water from Pine liquids through Creek. The town engineer has selected two plans for discharging the comparison: a gravity plan (divert water at a point mates costs a 10 miles up Pine Creek and pipe it by gravity to the estimated that town) and a pumping plan (divert water at a point made, the wa closer to town). The pumping plant would be built in each year. As two stages, with half-capacity installed initially and Clean, has o the other half installed 10 years later. liquids for The analysis will assume a 40-year life, 10% way, there interest, and no salvage value. Use an annual cash ment after flow analysis to find which plan is more economical. annual cas Hydro-Cle Gravity Pumping 6-41 Bill Ande initially h Initial investment $2,800,000 $1,400,000 $30,000 Investment in 10th year None 200,000 payment Operation and maintenance 10,000/yr 25,000/yr made the Power cost 2-year-o Average first 10 years None 50,000/yr the cycl Average next 30 years None 100,000/yr De plan. E $30,00 6-38 A manufacturer is considering replacing a end of ding, Al Silva bor- to be repaid in 25 Its. After making finance the loan at ars. E pay the balance rge of 2% of the O service charge financed by the For, issuming month

Explanation / Answer

For Gravity Plan:

Present Value of Cashflows = - $2800000 - Present Value of Annuity for payment of $10000 for 40 years

= -$2800000 - Payment * [1- (1+r)-n]/r

= -$2800000 - 10000* [1-(1+10%)-40]/10%

= -$2800000 - $97790.507 = -$2897790.507

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For Pumping Plan:

Present Value of Cashflows = -$1400000 - $200000/(1+10%)10 -  Present Value of Annuity for payment of $25000 for 40 years -  Present Value of Annuity for payment of $50000 for 10 years - Discount Power cost for next 30 years

= -$1400000 - $77108.658 - O&M Payment * [1- (1+r)-n]/r - Power Payment * [1- (1+r)-n1]/r - Discount Power cost for next 30 years

=  -$1400000 - $77108.658 - 25000 * [1-(1+10%)-40]/10% - 50000 * [1-(1+10%)-10]/10% - Discount Power cost for next 30 years

= -$1400000 - $77108.658 - $244476.268 - $307228.3553 -  Discount Power cost for next 30 years

= -$2028813.281 - [100000/(1+10%)11 + 100000/(1+10%)12 +100000/(1+10%)13 +..............+100000/(1+10%)40]

Using formula for sum of geometric progression with common ratio 1/(1+10%) and first term =100000/(1+10%)11 and n= 30, we get

Sum = first term * ( 1- common ration)/(1-common ratio)

= $100000/(1+10%)11 * (1- ( 1/(1+10%)30 )/ 1- (1/(1+10%))

= $100000/1.111 * (1- ( 1/(1.1)30 )/ 1- (1/(1.1))

= $942691.4467

Present value of cashflows therefore = -$2028813.281 - $942691.4467 = $2971504.728

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First plan will cost $73714.2207 less than pumping station plan

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