Answer :
Step 1: First calculate net present value of the cashflows:
NPV = CF0 + CF1/(1+r)1 + CF2/(1+r)2+................................+CFn/(1+r)n
r = rate of interest(MARR) = 13%
Putting cash flows in the formula above , we get:
= -50,000 + 12,000/(1+0.13)1 + 8000/(1+0.13)2 + (-11,000)/(1+0.13)3 + 6000/(1+0.13)4 + 8000/(1+0.13)5 + 10,000/(1+0.13)6 + 12,000/(1+0.13)7 + 14,000/(1+0.13)8 + (-4000)/(1+0.13)9 + 16,000/(1+0.13)10 + 12,000/(1+0.13)11 + 8000/(1+0.13)12 + 4000/(1+0.13)13
NPV = -$8,374.22
Step 2 : Equivalent annual worth = r (NPV)/ (1-(1+r)-n)
r = 13% and n = 13 years
Putting the values in the formula we get :
= 0.13(-8374.22) / (1-(1+0.13)-13)
= $-1,367.93
Q.4 The following cash flow is associated with a project under consideration in your company. Determine...
Determine Value of Investment
Nu Things, Inc., is considering investing in a business venture with the following anticipated cash flow results: EOY Cash Flow 0 $70,000 $20,000 $19,000 $18,000 $17,000 $16,000 $15,000 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 Assume MARR is 20 percent per year. Based on an internal rate of return analysis:
Engineering Economics: Show in Excel:
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