Question

1. A chemical company is considering selecting one of the alternative projects at MARR of 10% per year and 8 years study period. It uses Straight Line Depreciation to assess its assets Book Values (BV), where BV is used to estimate Market Value. Project A Project B Initial Cost, BD 2 0,000 35,000 Uniform Annual Benefit, BD 4,500 5,500 Salvage Value, BD 5,000 7,000 Useful Life, Years 10 In order to compare between the two projects based on PW analysis; i. The PW for project A is close to: a) BD-2,120.000 b) BD 440.000 c) BD 2,540.000 d) BD 13,830.000 e) None of the above ii. The PW for project B is close to: a) BD-2,390.000 b) BD-2350.000 c) BD 1,490.000 d) BD 220.000 e) None of the above iii. The BV at the required study period for project A: a) BD 0 per year b) BD 15,000 per year c) BD 16,250 per year d) BD 5,000 per year

Answer 1

pun of MARR 10% future cash flow at tinet a II tvit pun for project A = Bw of Benetits - Pw of costs 4500 u suo - 4500 - 4500 - 31- + + + 1.16 TT 1112 - 1+12 - 20,000 + 5000 1.16 Ź 195a2.20+ sooo 116 - 20 000 = 241 6.13 Olticdis close to 2415AI Yw for projeet B aoss a t ass - te... S 500 7000 + 70 SS000 11 1,10 JOOSS 7000 10 - 15000 730722.85+ = -157835 option o is close to BO 220

SV s MV - BV ASV 20000 - BV 50000 - 20000 - BV BOOK value = BV=$15000 option up is corneet