Question

The product development group of a high-tech electronics company developed five proposals for new products. The company wants to expand its product offerings, so it will undertake all projects that are economically attractive at the company’s MARR of 14% per year. The cash flows (in $1000 units) associated with each project are estimated. Which projects, if any, should the company accept on the basis of a present worth analysis? Project A B C D E Initial Investment $-200 $-510 $-550 $-820 $-850 Operating Cost, per Year $-90 $-150 $-200 $-470 $-570 Revenue, per Year $360 $200 $300 $525 $725 Salvage Value $6 $16 $4 $90 $140 Life 3 years 10 years 5 years 8 years 4 years The present worth of project A is $ . The present worth of project B is $ . The present worth of project C is $ . The present worth of project D is $ . The present worth of project E is $ .

Answer 1

Particular	Project A ($)	Project B ($)	Project C ($)	Project D ($)	Project E ($)
Initial Investment	200	510	550	820	850
Operating cost	90	150	200	470	570
Revenue	360	200	300	525	725
Net flow per year	70	(460)	(450)	(765)	(695)
Present value annuity factor (Life)	2.321	5.216	3.433	4.638	2.913
Present value Net flow	162.47	(2399.36)	(1544.85)	(3548.07)	(2024.535)
Salvage value	6	16	4	90	140
Present value factor for the last year of project life	0.675	0.270	0.519	0.351	0.592
Present value of salvage	4.05	4.32	2.076	31.59	82.88

Cash flow for the life	$1000	$1000	$1000	$1000	$1000
Present value factor	2.321	5.216	3.433	4.638	2.913
Present value of cash flow	2321	5216	3433	4638	2913
Present value of net flow and salvage	166.52	(2395.04)	(1542.77)	(3516.48)	(1941.65)
Total present worth of projects	2487.52	2820.96	1890.23	1121.52	971.35