Silver Lining Inc. is considering two projects. Project A requires an investment of $41,000. Estimated annual receipts for 20 years are $25,000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $80,000, has annual receipts for 20 years of $31,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 10.0 percent/year. Projects are NOT mutually exclusive. What is the present worth of each project? Which project(s) should be chosen? Why?
Silver Lining Inc. is considering two projects. Project A requires an investment of $41,000. Estimated annual receipts for 20 years are $25,000; estimated annual costs are $12,500. An alternative project, B, requires an investment of $80,000, has annual receipts for 20 years of $31,000, and has annual costs of $18,000. Assume both projects have a zero salvage value and that MARR is 10.0 percent/year. Projects are NOT mutually exclusive. What is the present worth of each project? Which project(s) should be chosen? Why?
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Read each problem carefully and solve showing all your assumptions and calculations.
Four independent projects are available for selection at Clean Water Engineering. Select any or all of the following projects, using a MARR of 10% per year using the project selection guidelines below.
|
Initial |
Annual |
Life, |
Salvage |
|
|
Project |
Investment, $ |
NCF, $/Year |
Years |
Value, $ |
|
A |
â250,000 |
+50,000 |
4 |
+45,000 |
|
B |
â200,000 |
+90,000 |
4 |
â10,000 |
|
C |
â175,000 |
+75,000 |
4 |
+15,000 |
|
D |
-150,000 |
+80,000 |
4 |
0 |
a) Calculate the PW method for each project based on the data provided. (4 pts)
b) Use the PW method and hand solution to select the economically best project(s) if the executive team at Clean Water Engineering has established a capital investment limit of $345,000. (2 points)
c) Use the PW method and hand solution to select the economically best project(s) if the executive team at Clean Water Engineering has established a capital investment limit of $400,000. (2 points)
d) If the four projects listed above are mutually exclusive alternatives, which project(s) is economically justified? (2 points)
