Question

please show work and box answers

5. (15 points) A project is estimated in the face of a MARR = 15% as follows: Optimistic Most likely Pessimistic Investment $45,000 $50,000 $55,000 Service life 6 years 5 years 4 years Salvage value $15.000 $12,000 $10,000 Net annual return $16,000 $13,000 $10,000 Find the annual equivalent amount for each possible outcome

Answer 1

The annual equivalent amount under optimistic outcome is calculated as follows:-

Annual equivalent amount = - $ 45,000 ( A/P, 15%, 6 years ) + $ 16,000 + $ 15,000 ( A/F , 15% , 6 years)

Where ( A/P, 15%, 6 years ) = Capital recovery factor & ( A/F , 15% , 6 years) = Sinking fund

Annual equivalent amount = - $ 45,000 x 0.264237 + $ 16,000 + $ 15,000 x 0.114237

Annual equivalent amount optimistic outcome = $ 5,822.89

The annual equivalent amount under most likely outcome is calculated as follows:-

Annual equivalent amount = - $ 50,000 ( A/P, 15%, 5 years ) + $ 13,000 + $ 12,000 ( A/F , 15% , 5 years)

Annual equivalent amount = - $ 50,000 x 0.298316 + $ 13,000 + $ 12,000 x 0.148316

Annual equivalent amount most likely outcome = - $ 136.01

The annual equivalent amount under pessimistic outcome is calculated as follows:-

Annual equivalent amount = - $ 55,000 ( A/P, 15%, 4 years ) + $ 10,000 + $ 10,000 ( A/F , 15% , 4 years)

Annual equivalent amount = - $ 55,000 x 0.350265 + $ 10,000 + $ 10,000 x 0.200265

Annual equivalent amount under pessimistic outcome = - $ 7,261.93