Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendationbased on the following methods.a. Based on PW method. Design is more economical.b. The modified B/C ratio of Design Y isThe modified B/C ration of Design Z is(Round to two decimal places)(Round to two decimal places)c. The incremental B/C ratio is (Round to two decimal places)Therefore, based on the B/C ratio method, Designd. The discounted payback period of Design Y isThe discounted payback period of Design Z isis more economicalyears (Round to one decimal place)years (Round to one decimal place)Investment costAnnual revenueAnnual costUseful lifeSalvage valueNet PWTherefore, based on the payback period method, Design would be preferred.(e) Why could the recommendations based on the payback period method be different from the other two methods?O A. because the payback period method ignores the cash flows after the payback periodO B. because the payback period gives more weight to the cash flows after the payback periodDesign YDesign Z$140,000 $275,000$45,426 $86,819$8,494 $28,55115 years$14,70015 years$33,000$144,427$176,091

Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendatio based on the following methods. a. Based on PW method, Design is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is (Round to two decimal places) (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is Therefore, based on the B/C ratio method, Design is more economical Investment cost Annual revenue Annual cost Useful life Salvage value Net PW Com Design Y Design Z $140,000 $275,000 $45,426 $86,819 $8,494 $28,551 15 years 15 years $14,700 $33,000 $144,427 $176,091

Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendatio based on the following methods. a. Based on PW method, Design is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is (Round to two decimal places) (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is Therefore, based on the B/C ratio method, Design is more economical Investment cost Annual revenue Annual cost Useful life Salvage value Net PW Com Design Y Design Z $140,000 $275,000 $45,426 $86,819 $8,494 $28,551 15 years 15 years $14,700 $33,000 $144,427 $176,091

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When evaluating projects by the present worth method, how do you know which one(s) to select, if the (a) projects are independent, and (b) alternatives are mutually exclusive?
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Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y Investment cost Annual revenue Annual cost Useful life Salvage value Net PW a. Based on PW method, Design b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is is more economical. $140,000 $43,705 $7,881 d. The discounted payback period of Design Y is The discounted payback period of Design Z is Design Z c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design $275,000 $86,582 $27,683 15 years 15 years $14,700 $33,000 $135,999 $180,890 (Round to two decimal places) (Round to two decimal places) is more economical years (Round to one decimal place) years (Round to one decimal place) Therefore, based on the…
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