Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are...
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Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 8% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. a. Based on PW method, Design is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design is more economical Investment cost Annual revenue Annual cost Useful life Salvage value Net PW d. The discounted payback period of Design Y is The discounted payback period of Design Z is years (Round to one decimal place) years (Round to one decimal place) Therefore, based on the payback period method, Design would be preferred. (e) Why could the recommendations based on the payback period method be different from the other two methods? O A. because the payback period method ignores the cash flows after the payback period O B. because the payback period gives more weight to the cash flows after the payback period www Design Y $140,000 $45,914 $7,652 15 years $14,700 Design Z $275,000 $79,272 $20,552 15 years $33,000 $192,137 $238,016 Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 8% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. a. Based on PW method, Design is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design is more economical Investment cost Annual revenue Annual cost Useful life Salvage value Net PW d. The discounted payback period of Design Y is The discounted payback period of Design Z is years (Round to one decimal place) years (Round to one decimal place) Therefore, based on the payback period method, Design would be preferred. (e) Why could the recommendations based on the payback period method be different from the other two methods? O A. because the payback period method ignores the cash flows after the payback period O B. because the payback period gives more weight to the cash flows after the payback period www Design Y $140,000 $45,914 $7,652 15 years $14,700 Design Z $275,000 $79,272 $20,552 15 years $33,000 $192,137 $238,016
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SOLUTION a Based on the PW Present Worth method Design Y is more economical because it has a higher ... View the full answer
Related Book For
Engineering Economy
ISBN: 978-0133439274
16th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Posted Date:
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