Question

Nules. Enter the information exactly as below. Factor Annuity (05"/1.ES/"E71/((1+5)*E7-1) =3*G3 30,000.00 Investment Save: 300000 0.10 MARR Market value $120,000.00 (A/P =300000*0.1 0.15 $8,000.00 AFI, E5/((1+5)*87-1) 1666 Benefit *H4/H3-H6) (do not forget to write the = sign) To format columns with numbers: right click the mouse in the cell you whic Cancel S

Answer 1

1.

False

Working note:

PW of the savings = 30000*(1-1/1.15^6)/.15 + 8000/1.15^6 - 120000

PW of the savings = -$3006.9

Since PW is negative, so investments is not acceptable and it should not take place.

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2.

True

Working note:

When MARR decreases from 15% to 14% or less, then PW becomes positive. Then, investment should be accepted.

When MARR = 14%

Then,

PW of the savings = 30000*(1-1/1.14^6)/.14 + 8000/1.14^6 - 120000

PW of the savings = $304.72

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3.

Yes

Working note:

When salvage value is $20000, then:

PW = 30000*(1-1/1.15^6)/.15 + 20000/1.15^6 - 120000

PW = 2181.03

Now, PW is positive, so project should be accepted.

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4.

True

Working note:

PW = 30000*(1-1/1.15^10)/.15 + 8000/1.15^10 - 120000

PW = $32540.54

Now, PW is positive, so investment should be accepted.