please show all work Part C. Problem Solving. SHOW ALL YOUR WORK FOR COMPLETE CR
ID: 336112 • Letter: P
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please show all work
Part C. Problem Solving. SHOW ALL YOUR WORK FOR COMPLETE CREDI 12. A project is being considered that has a first cost of $12,500, creates $5,000)n annual in annual operating costs, and has a salvage value (i.e. you can recover this amount) $2,000 after a project life of 3 years, if interest is 10% per year A. Which formula calculates the projects present worth? (2 points) a. PW : 12,500 (P/F, 10%, 1) + (-5,000+3,000) (P/A, 1096, 3)-2000(F/P, 10%, 3) b. Pw--12,500 + (-5,000+3,000) (P/A, 1096, 3)-2,000(P/F, 10%, 3) c. Pw--12,500 (F/P, 10%, 1) + (-5,000+3,000) (F/A, 1096, 3) + 2,000 d.JPw-5,000 (P/A, 10%, 3)-3,000 (P/A, 10%, 3) + Using the formula selected above, what is the net presen (2 points) 2,000(P/F, 1096, 3) 12,500 B. t worth? Show all work for full credit Would you invest in this project? Circle Yes or No below. Also explain your choice within 2 sentences? (3 points) C.Explanation / Answer
A) The correct formula is (d)
Compound interest factors:
(P/A, 10%, 3) = ((1+10%)^3-1)/(10%*(1+10%)^3) = 2.4869
(P/F, 10%, 3) = 1/(1+10%)^3 = 0.7513
B)
Net Present Worth of the project = (5000-3000)*2.4869 + 2000*0.7513 - 12500 = - 6,024
C) No, because the Net Present Worth of the project is negative. It means that the discounted time value of the net cashflow of the project is a net outflow (loss)
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