Question

Contirm your decision usi t 6Which Design should be chosen from the designs listed below? A 10 year study period and MARR-10% per year is to be used. No market value considered Capital investment Annual receipts Annual expenses Design A $170,000 114,000 70,000 Design BDesign C S300,000 130,000 $330,000 147,000 79,000 64,000

Answer 1

To select the best investment we will use annual worth method.

AW = - Initial investment (A/P,I,n) + receipts - expenses

n = 10 years

I = 10% = 0.1

(A/P,I,n) = I (1+I)ⁿ / ((1+I)ⁿ​​​​​​ - 1)

(A/P,10%,10) = 0.1(1+0.1)¹⁰/( (1+0.1)¹⁰-1) = 0.163

Design	investment	(A/P,10%,10)	(-)investment X (A/P,10%,10)		(-)Annual expenses	Annual receipt	AW
A	170000	0.163	27710		70000	114000	16290
B	330000	0.163	53790		79000	147000	14120
C	300000	0.163	48900		64000	130000	17100

According to Annual worth method I will choose deign C