Question

X= -500

Y=-50

Q=-60

S=600

Z=120

R=6.00%

P=-1200

2. Project C costs x to begin and costs Y every year to operate with a salvage value of Z at the end of Year 5. Project D costs P to begin and costs a every year to oper of S at the end. D will last forever. Use an annual rate of R to conduct an Annual Worth Analysis to determine the AW of both C and D. ate with a salvage value

Answer 1

ANSWER:

1) Project c:

aw = x(a/p,i,n) + y + z(a/f,i,n)

aw = -500(a/p,6%,5) -50 + 120(a/f,6%,5)

aw = -500 * 0.2374 - 50 + 120 * 0.1774

aw = -118.7 - 50 + 14.088

aw = -154.612

2) Project d:

aw = p(a/p,i,n) + q + s(a/f,i,n)

aw = -1200(a/p,6%,infinity) -60 + 600(a/f,6%,infinity)

aw = -1200 * 0.06 - 60 + 600 * 0

aw = -72 - 60 + 0

aw = -132

so the annual worth of c is 154.612 and that of d is -132.

so we should select project d based on annual worth.