Question: 5-2. A project your firm is considering for imple- mentation has these estimated costs and revenues: an investment cost of $50,000, maintenance costs that start

 5-2. A project your firm is considering for imple- mentation has
these estimated costs and revenues: an investment cost of $50,000, maintenance costs

5-2. A project your firm is considering for imple- mentation has these estimated costs and revenues: an investment cost of $50,000, maintenance costs that start at $5,000 at end-of-year (EOY) one and increase by $1,000 for each of the next four years, and then remain constant for the following five years; savings of $20,00O per year (EOY110); and finally a resale value of $35,000 at EOY 10. If the project has a 10-year life and the firm's MARR is 10% per year, what is the present worth of the project? Is it a sound investment opportunity? (5.3) 5-27. A company is considering constructing a plant to manufacture a proposed new product. The land costs $300,000, the building costs $600,000, the equipment Costs $250,000, and $100,000 additional working capital is required It is expected that the product will result in sales of $750,000 per year for 10 years, at which time the land can be sold for $400,000, the building for $350,000, and the equipment for $50,000, All of the working capital would be recovered at the EOY 10. The annual expenses for labor, materials, and all other items are estimated to total $475,000. If the company requires a MARR of 15% per year on projects of comparable risk, determine if it should invest in the new product line. Use the AW method. (5.5)

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