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This document contains the solutions to Chapter 6 problems from a textbook. It provides present worth (PW) and capitalized cost (CC) calculations for a variety of scenarios involving cash flows over time, including equipment purchase decisions, investment alternatives, and project evaluations. The calculations determine whether the target rate is met and identify the optimal choice based on the lowest negative or highest positive PW and CC values.

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Ahmed walid
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16 views5 pages

6 Answers

This document contains the solutions to Chapter 6 problems from a textbook. It provides present worth (PW) and capitalized cost (CC) calculations for a variety of scenarios involving cash flows over time, including equipment purchase decisions, investment alternatives, and project evaluations. The calculations determine whether the target rate is met and identify the optimal choice based on the lowest negative or highest positive PW and CC values.

Uploaded by

Ahmed walid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 5

CHAPTER 6 ANSWERS

6.9 Subscripts are C for contract service and B for Burling Coop installed.

PWC = $- 354,407

PWB = $-402,744

The contract service is a better deal with a smaller PW of costs.

6.10
PW = $+40.26

6.11 PW = $-155

No, the bond investment does not make the target rate since PW < 0.

6.12 (a) V = $100,000

(b) Maturity is 60/4 = 15 years.

(c) Effective annual rate 4.51% per year

6.13 Bottled: Cost/mo = $30


PW =$-348.57

Filtered: Cost/mo = $16.20


PW = $-188.23

Tap: Cost/mo = $0.4125


PW = $-4.79

6.14 PWpull = $-5187.780 ($-5,187,780)

PWpush = $-5803.265 ($-5,803,265)

6.15 Monetary units are in $1000. Calculate PW values to select Siemens.

PWDel = $-1500.355 ($-1,500,355)

4- 1
PWSie = $-1431.786 ($-1,431,786)

6.16 Monetary units are in $ million. Calculate PW values to select alternative B.

PWA = $-3553.4525 ($-3.55 billion)

PWB = $-2398.90 ($-2.40 billion)

PWC = $-3453.427 ($-3.45 billion)

6.17 PWProf = $-57,495

PWExec = $-75,943

Select the Professional Plan.


6.18 PWH = $-259,271

Effective i = 6.152%

PWG = $-150,592

Select Gwendelyn’s plan.

6.19 (a) Use LCM = 6 years for PW analysis to select method A.

PWA = $-326,184

PWB = $-337,106

(b) Use n = 3 in all calculations and do not repurchase A. Still select method A,
now by a larger margin.

PWA = $-186,253

PWB = $-299,738

6.20 PWA = $-382,433

PWB = $-337,106

Select method B, which is a change from the previous choice.

6.21 (a) PWC = $-375,922

For asphalt, repave after 10 years and re-start maintenance charge in year 12.

4- 2
PWA = $-386,958

Select the concrete option, with a marginal advantage.

(b) Maintenance costs are incurred over 5 years only; there are none for concrete.
Now select the asphalt option by a large margin.

PWC = $-375,000

PWA = $-257,667

6.22 (a) LCM is 6 years for R and T evaluation. Select vendor T.

PWR = $-305,798

PWT = $-231,702

(b) Re-purchase R after 2 years. Rental is paid at the end of each year.

PWR = $-204,126

PWT = $-132,304

PWrent =$-124,345

6.23 (a) PW analysis requires an LCM of 12 years. Select machine D.

PWD = $-190,344

PWE = $-217,928

(b) Select machine D.

FWD = $-1,018,398

FWE = $-1,165,980

6.24 PWD = $-129,437

PWE = $-142,424

Select machine D.

4- 3
6.25 Calculate FW in 15 years to select the 35% more efficient freezer.

FW20% = $-4280

FW35% = $-3962

6.26 FWC = $-907,336


FWM = $-1,075,244

6.29 (a)
A = $2160 per month

(b)

A = $26,698 per year

6.30 Monetary terms are in $1000 units.

CC = $-644.437 ($-644,437)

6.31 (a) CC = $+144,132,294

(b) Use Equation [6.3] to calculate A.

A = $11,530,584

The A means that the toll road should have an equivalent annual cash
flow of approximately $11.53 million for the foreseeable future.

6.32 Find AW and then divide by i, according to Equation [6.2].

AW = $-37,751

CC = $-314,589

6.33 CC= $2,100,000


6.34 CC = $33,333

1000(F/A,1.5%,n) = 33,333
Tom can spend at the $1000 per month rate for only 2 years and 3 months before
obligating himself to a $500 per month debt payment for the rest of his life!

6.35 Monetary terms are $ million units. Determine CC values to select undersea route.

CCland = $-426.13 ($-426,130,000)

CCsea = $-370.0 ($-370,000,000)

4- 4
6.36 Monetary terms are $1000 units. Determine CC values of revenues minus costs to
select plan 2.
CC1 = $-43,567.552 ($-43,567,552)

CC2 = $-40,207.685 ($-40,207,685)

6.37 Monetary terms are $1000 units. Determine CC values of revenues minus costs to
select design B.

CCA = $+1024.555 ($+1,024,555)

CCB = +$2172.924 ($+2,172,924)


6.38 Monetary terms are $1000 units. Determine CC values of to select wells.

CCdam = $-10,500 ($-10,500,000)

CCwells = $-6285.00 ($-6,285,000)

6.39
CCE = $+4775.35 ($+4,775,350)

CCF = $-1527.217 ($-1,527,217)

CCG = $+3333.333 ($+3,333,333)

4- 5

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