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All rights reserved. No part of this Manual may be displayed, reproduced or distributed in any form or by any means, without the prior written permission of the publisher, or used beyond the limited distribution to teachers and educators permitted by McGraw-Hill for their individual course preparation. If you are a student using this Manual, you are using it without permission. For example, if there is no F involved when using the PMT function to solve a particular problem, it can be left blank because it is an end function.
When the function involved is an interior one like P in the PMT function , a comma must be put in its position. A spreadsheet uses the FV function as shown in the formula bar. Largest maintenance charge is in the last year and, therefore, no compound interest is accumulated by it.
The fastest method is to use the spreadsheet function: FV The following are examples only. The first four steps are: Define objective, information collection, alternative definition and estimates, and criteria for decision-making. Objective: Select the most economic alternative that also meets requirements such as production rate, quality specifications, manufacturability for design specifications, etc. Information: Each alternative must have estimates for life likely 10 years , AOC and other costs e.
Alternatives: For both A and B, some of the required data to perform an analysis are: P and S must be estimated. Training and other cost estimates annual, periodic, one-time must be finalized. Criteria: Can use either present worth or annual worth to select between A and B.
Consider these and others like them: Debt capital availability and cost Competition and size of market share required Employee safety of plastics used in processing 3. Chapter 3 Combining Factors Solutions to Problems 3. Now substitute A values for cash flows. Therefore, Plan C with a year fixed rate is the preferred financing method.
In buying down interest, you must give lender money now instead of money later. Case Study Solution 1. Set first cost of toilet equal to monthly savings and solve for n: [ Therefore, the payback period is much more sensitive to the toilet life than to the interest rate.
Therefore, the success of the program is not sensitive to the percentage of cost rebated. But the cost decreases rapidly as life increases. If further sensitivity analysis is performed, the following results are obtained.
These calculations reveal that at very short toilet lives years , there are some conditions under which the program will not be financially successful. Here the asset would be used for only a part of its three-year life cycle. FE Review Solutions 6. Spreadsheet and chart are below. Revised costs and savings are in columns F-H. Note that both series end at the end of month A nonconventional series has more than one sign change.
However, in this case, since the cumulative cash flow is negative, there is no positive rate of return value. Therefore, there is only one positive, real solution. This is a nominal interest rate per year. Answers a and b are correct. Therefore, the best answer is c. Extended Exercise 1 Solution Solution by hand 1.
The following spreadsheets have the same information as the two tables above. The x-y scatter charts are year column A versus total owed column B. The indicator lines and curves were drawn separately. Some cells must be changed to obtain the rate of return values shown in column H.
These are described below. Therefore, the only way to obtain a rate of return is on the increment of investment. The situation would be similar to receiving a loan in the amount of the difference between the two alternatives if the lower cost alternative is selected.
The rate of return would represent the interest paid on the loan. Since it is higher than what the company would consider attractive i. Therefore, select the alternative with the higher initial investment, A. Perform an incremental cash flow analysis. Therefore, select machine 4. Increment between 2 and 3 is justified, but not increment between 3 and 4. Therefore, select machine 3.
Therefore, select proposal D c Proposal A is justified. Select F as first alternative; compare remaining alternatives incrementally. FE Review Solutions 8. Now perform an 2. Perform an incremental analysis of investment is necessary to expand cash flow by three years. This is not necessary. No extra 3. IRR K4:K44 is indicated. This analysis is not necessary, but shows how Excel can be used over the LCM to find a rate of return.
Case Study 1 Solution 1. Cash flows for each option are summarized at top of the spreadsheet. Rows show annual estimates for options in increasing order of initial investment: 3, 2, 1, 4, 5. No values other than Do incremental ROR analysis after removing 1 and 2.
See row Conclusion: Select option 4 — trade-out with friend. PW vs. Make the values in years 5 through 8 of option 3 equal to the value in cell C6, so they reflect the changes. Case Study 2 Solution 1. Calculations for the following are shown on the spreadsheet below. Plan A is selected.
The decisions contradict each other when the MARR is different. ROR approach: The cash flow series have two sign changes, so a maximum of two roots may be found. Incremental ROR analysis is shown on the spreadsheet below. Plan B has a larger initial investment than A.
The incremental cash flow series B- A has two sign changes. The use of the IRR function finds the same two roots: 9. Incremental ROR analysis offers no definitive resolution. Reject Plan A. Accept Plan A. Accept Plan B. Reject Plan B. Conclusion: The composite rate of return evaluation yields unambiguous results when a reinvestment rate is specified. Private sector projects are usually funded by stocks, corporate bonds, or bank loans. Contractor is involved in design of highway; contractor is not provided with the final plans before building the highway.
Obtaining project financing may be a partial responsibility in conjunction with the government unit. Corporation will probably operate the highway tolls, maintenance, management for some years after construction.
Corporation will legally own the highway right of way and improvements until contracted time is over and title transfer occurs. Profit return on investment will be stated in the contract.
Ingenieria Económica - 6ta Edición - Leland Blank y Anthony Tarquin.pdf
Ingenieria Economica by Anthony Tarquin Leland Blank