(a)
To construct:A choice table for interest tables from 0% to 100%
(a)
Answer to Problem 9P
From table below, from 0% to 7.98%, South end + North end should be preferred on account of higher
Explanation of Solution
NPV of South end
NPV of South & North end
Choice table for interest from 0% to 100%
Interest rate | (P/A,i,5) | (P/F,i,5) | South end | South + North end |
0% | 5.00 | 1.00 | 1,425,000 | 1,775,000 |
1% | 4.85 | 0.95 | 1,383,228 | 1,680,705 |
2% | 4.71 | 0.91 | 1,343,336 | 1,591,115 |
3% | 4.58 | 0.86 | 1,305,217 | 1,505,941 |
4% | 4.45 | 0.82 | 1,268,769 | 1,424,915 |
5% | 4.33 | 0.78 | 1,233,901 | 1,347,788 |
6% | 4.21 | 0.75 | 1,200,524 | 1,274,327 |
7% | 4.10 | 0.71 | 1,168,556 | 1,204,318 |
8% | 3.99 | 0.68 | 1,137,922 | 1,137,558 |
9% | 3.89 | 0.65 | 1,108,551 | 1,073,861 |
10% | 3.79 | 0.62 | 1,080,374 | 1,013,052 |
11% | 3.70 | 0.59 | 1,053,331 | 954,968 |
12% | 3.60 | 0.57 | 1,027,361 | 899,457 |
13% | 3.52 | 0.54 | 1,002,411 | 846,376 |
14% | 3.43 | 0.52 | 978,428 | 795,593 |
15% | 3.35 | 0.50 | 955,364 | 746,984 |
16% | 3.27 | 0.48 | 933,174 | 700,431 |
17% | 3.20 | 0.46 | 911,814 | 655,825 |
18% | 3.13 | 0.44 | 891,244 | 613,064 |
19% | 3.06 | 0.42 | 871,426 | 572,053 |
20% | 2.99 | 0.40 | 852,324 | 532,700 |
21% | 2.93 | 0.39 | 833,906 | 494,921 |
22% | 2.86 | 0.37 | 816,137 | 458,637 |
23% | 2.80 | 0.36 | 798,990 | 423,773 |
24% | 2.75 | 0.34 | 782,435 | 390,258 |
25% | 2.69 | 0.33 | 766,445 | 358,026 |
26% | 2.64 | 0.31 | 750,995 | 327,014 |
27% | 2.58 | 0.30 | 736,062 | 297,164 |
28% | 2.53 | 0.29 | 721,622 | 268,421 |
29% | 2.48 | 0.28 | 707,654 | 240,732 |
30% | 2.44 | 0.27 | 694,137 | 214,047 |
31% | 2.39 | 0.26 | 681,053 | 188,320 |
32% | 2.35 | 0.25 | 668,383 | 163,507 |
33% | 2.30 | 0.24 | 656,110 | 139,566 |
34% | 2.26 | 0.23 | 644,217 | 116,458 |
35% | 2.22 | 0.22 | 632,689 | 94,145 |
36% | 2.18 | 0.21 | 621,510 | 72,592 |
37% | 2.14 | 0.21 | 610,668 | 51,766 |
38% | 2.11 | 0.20 | 600,147 | 31,636 |
39% | 2.07 | 0.19 | 589,936 | 12,170 |
40% | 2.04 | 0.19 | 580,022 | (6,659) |
41% | 2.00 | 0.18 | 570,394 | (24,879) |
42% | 1.97 | 0.17 | 561,040 | (42,515) |
43% | 1.94 | 0.17 | 551,951 | (59,591) |
44% | 1.91 | 0.16 | 543,116 | (76,132) |
45% | 1.88 | 0.16 | 534,525 | (92,157) |
46% | 1.85 | 0.15 | 526,170 | (107,689) |
47% | 1.82 | 0.15 | 518,042 | (122,748) |
48% | 1.79 | 0.14 | 510,133 | (137,352) |
49% | 1.76 | 0.14 | 502,434 | (151,520) |
50% | 1.74 | 0.13 | 494,938 | (165,267) |
51% | 1.71 | 0.13 | 487,638 | (178,612) |
52% | 1.69 | 0.12 | 480,527 | (191,570) |
53% | 1.66 | 0.12 | 473,598 | (204,154) |
54% | 1.64 | 0.12 | 466,845 | (216,381) |
55% | 1.61 | 0.11 | 460,262 | (228,262) |
56% | 1.59 | 0.11 | 453,844 | (239,811) |
57% | 1.57 | 0.10 | 447,583 | (251,040) |
58% | 1.55 | 0.10 | 441,476 | (261,962) |
59% | 1.53 | 0.10 | 435,517 | (272,586) |
60% | 1.51 | 0.10 | 429,700 | (282,925) |
61% | 1.49 | 0.09 | 424,023 | (292,987) |
62% | 1.47 | 0.09 | 418,479 | (302,784) |
63% | 1.45 | 0.09 | 413,065 | (312,325) |
64% | 1.43 | 0.08 | 407,777 | (321,618) |
65% | 1.41 | 0.08 | 402,610 | (330,672) |
66% | 1.39 | 0.08 | 397,560 | (339,495) |
67% | 1.38 | 0.08 | 392,625 | (348,095) |
68% | 1.36 | 0.07 | 387,800 | (356,481) |
69% | 1.34 | 0.07 | 383,082 | (364,658) |
70% | 1.33 | 0.07 | 378,468 | (372,634) |
71% | 1.31 | 0.07 | 373,954 | (380,417) |
72% | 1.30 | 0.07 | 369,539 | (388,011) |
73% | 1.28 | 0.06 | 365,217 | (395,423) |
74% | 1.27 | 0.06 | 360,988 | (402,660) |
75% | 1.25 | 0.06 | 356,848 | (409,726) |
76% | 1.24 | 0.06 | 352,794 | (416,628) |
77% | 1.22 | 0.06 | 348,825 | (423,370) |
78% | 1.21 | 0.06 | 344,937 | (429,958) |
79% | 1.20 | 0.05 | 341,128 | (436,396) |
80% | 1.18 | 0.05 | 337,396 | (442,689) |
81% | 1.17 | 0.05 | 333,740 | (448,841) |
82% | 1.16 | 0.05 | 330,156 | (454,857) |
83% | 1.15 | 0.05 | 326,643 | (460,741) |
84% | 1.13 | 0.05 | 323,199 | (466,497) |
85% | 1.12 | 0.05 | 319,821 | (472,129) |
86% | 1.11 | 0.04 | 316,509 | (477,640) |
87% | 1.10 | 0.04 | 313,260 | (483,034) |
88% | 1.09 | 0.04 | 310,073 | (488,314) |
89% | 1.08 | 0.04 | 306,946 | (493,484) |
90% | 1.07 | 0.04 | 303,878 | (498,547) |
91% | 1.06 | 0.04 | 300,866 | (503,505) |
92% | 1.05 | 0.04 | 297,910 | (508,363) |
93% | 1.04 | 0.04 | 295,008 | (513,122) |
94% | 1.03 | 0.04 | 292,158 | (517,786) |
95% | 1.02 | 0.04 | 289,360 | (522,357) |
96% | 1.01 | 0.03 | 286,612 | (526,838) |
97% | 1.00 | 0.03 | 283,912 | (531,231) |
98% | 0.99 | 0.03 | 281,260 | (535,538) |
99% | 0.98 | 0.03 | 278,654 | (539,763) |
100% | 0.97 | 0.03 | 276,094 | (543,906) |
(b)
To compute:The expected rate of return when North end is open.
(b)
Answer to Problem 9P
Expected rate of return if North end is openis 7.98%.
Explanation of Solution
NPV of south end = NPV of south & north end
Solving the above equation by taking interest rates on hit and trial basis, i falls between 7% and 8%. Interpolating the two interest rates, i = 7.98%.
If interest rate is between 0% to 7.98%, then it is better to open north end, otherwise it is better to continue with the existing one.
Want to see more full solutions like this?
Chapter 8 Solutions
ENGR.ECONOMIC ANALYSIS W/DASHBOARD
- Question Completion Status: QUESTION 7 $ 300 250 200 150 100 50- 07. The minimum Average Variable Cost is O(a) $4 O Q 0 0 2 4 6 8 10 12 14 16 18 20 (b) $5 O (c) $10 O (d) $12 TC Type here to search 7 TVC TFC E 30 25 20 15 10 5 O Click Save and Submit to save and submit. Click Save All Answers to save all answers. 0- 0 2 4 8 10 12 14 16 18 20 Save All Answers MC AC AVC AFC Save and Submitarrow_forwardThe owner shop is contemlating adding anew product which will require additional mouthly payment of 6000, variable costs would be brirr. 2 per new product & its selling price is brirr. 7 each What would be the profit(loss) be if 1000 unit were sold in month?arrow_forwardP(t)5000t2+300t-200 models the profit P of vroom used car Dealership where t is the time in years. Evaluate p(12) and explain the meaningarrow_forward
- The figure below shows graphs of the fixed cost function, total cost function and the total revenue function for a certain commodity. 20 8000 7000 6000 5000 4000 Dollars ($) 3000 2000 1000 -10 -1000+ 10 20 30 40 Units (a) What is the break-even point? (x,y) e.g. (295,7650) (b) What are the fixed costs? $ TR Percent of capacity= 50 60 TC If the selling price per unit is $50, and the variable cost per unit is $40: FC 70 80 90 100 enter the answer in the form (c) If the maximum production capacity of the commodity is 110, express the break-even units as a percent of capacity? % (round to two decimal places if necessary)arrow_forwardDawn and Amelia work for an international advertising Dollars Dollars realized one agency. They are presented with four possible product campaigns for the year, of which they must choose only Campaign realized today year from today (in |(in thousands) thousands) one. The annual interest rate is 5%. They must choose the Globatel -13 235 campaign which will be most profitable to the company Wireless overall. The chart contains the costs and benefits for each Yummy of the projects. Use the information in the chart to 115 Tummy Pudding calculate the net present values and answer the questions. NiCad Electric 54 -24 Cars Excelsis Hot Air -55 106 Balloons What is the net present value of the Excelsis Hot Air Balloon campaign (in thousands)? Using your net present value calculations, which of the $ thousand four campaigns are Dawn and Amelia most likely to select? Yummy Tummy Pudding O Excelsis Hot Air Balloons O Globatel Wireless NiCad Electric Carsarrow_forwardHow would you change Acre's Reliability to better target Low End customer's needs? Reliability (MTBF) 10,000 17,043 50,000 Hint Submitarrow_forward
- 3 Your company plans to raise price on product A by 5% per year. Due to competition, sales volume from product A is expected to decline at 10% per year. Revenue will be $5M for this year. Alternatively, based on the projection from the marketing department, you may reduce the sales volume decline from 10% to 5% if the price is kept unchanged. The product will be discontinued at the end of year 5 for both scenarios. If the firm's TVOM is 10%, Determine the revenue cash flow streams for both alternatives. What is the Excel financial function to compute PW of the revenue streamsarrow_forwardWhich firm/s will continue to operate even if they are losingarrow_forwardwhats the range of profitabilityarrow_forward
- Cebu Tire and Rubber Company has a capacity to produce 650,000 tires of variable sizes per year. At present, it is operating at 62% capacity. The firm’s annual income is P 416,000. Annual fixed costs are P 192,000 and the variable costs are equal to P 0.356 per unit of product. (a) What is the firm annual profit or loss? (b) At what volume of sales does the firm break-even?arrow_forwardEconomics Joey is opening a coffee shop and he needs to decide how many baristas he should staff. He did some analysis of other coffee shops and he determined that this is an M/M/s system. He expects customers to arrive at the rate of 6 per minute and the service rate will be 3 customers per minute per barista. He estimates the cost of waiting Cwto bee60 and the cost of service Cs will bee14 per hour per barista. (a) What is the minimum number of servers this system must have? (b) What number of servers will minimise the total cost.arrow_forwardPrice/cost MC $52 АТС $40 $30 $28 $20 D $14 MR 100 130 140 160 Its total revenue will be $ Its total cost will be $ It will make a profit/loss/break even (circle one) of $arrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education