Question

Comparing MEAS with equal lives. When lives are equal adjustments to cash flows are not required. The MEAs can be compared by directly comparing their equivalent worth (PW,凡V, or A calculated using the MARR. The decision will be the same regardless of the equivalent worth method you use. For a MARR of 12%, select from among the MEAs below. Alternatives 8 Capital investment-$150,000$85,000$75,000 $120,000 Annualrevenues$28,000 $16000 $5000 $22,000 -$700 Annual expenses Market Value (EOL $20.000 $ Lire lyears -$1.000 -$550 -$500 $10,000$6,000$11,000 10 10 10 10

Answer 1

Solution

As per the equivalent worth first calculate preset value of all projects project A present worth implies -150000 + (28000 - 1000) times P/A (12 % , 10) + 20000 times P V (12 % , 10) Implies - 150000 + 27000 (5.6502) + 20000 (0.32197) Implies - 150000 + 152556.02 + 6439.4 Implies $ 8995.42 project B present worth Implies -85000 + (16000 - 550) times P/A (12 % , 10) + 10000 times P V (12 % , 10) Implies -85000 + 15450 (5.6502) + 10000 (0.32197) Implies -85000 + 87295.59 + 3219.7 Implies $ 5515.29 project c presents worth implies -75000 + (15000 - 500) times P/A (12 % , 10) + 6000 times P V (12 % , 10) Implies -75000 + 14500(5.6502) + 6000 (0.32197) Implies -75000 + 81927.9 + 1931.82 Implies $ 8859.72 \r\n project D present worth Implies -120000 + (22000 - 700) times P/A (12 % , 10) + 11000 times P V (12 % , 10) Implies -120000 + 21300 (5.6502) + 11000 (0.32197) Implies -12000 + 120349.26 + 3541.67 Implies 3890.93 here the line of the project A, B, C, D are equal so the project having highest present worth having highest equivalent worth and