Question

The chief engineer at Clean Water Engineering has established a capital investment limit of $750,000 for next year for projects related to concentrate management. Select any or all of the following independent projects using an MARR of 15% per year. What is the PW value of the selected project of bundle?(Enter your answer with appropriate sign)

Project	Initial Investment	Annual NCF,$ per year	Life in years	Salvage Value
A	-140000	50000	4	45000
B	-300000	90000	4	-10000
C	-590000	150000	6	100000

Answer 1

For selecting a combination of projects, we try to select some projects which are risky and some which are less risky to have a proper balance. Considering the same and also the budget of $750000, we should select projects A and C together with a total initial outlay of $730000 < $750000.

Now for this bundle, we have a total initial cost of $730000, total annual NCF of 200000 upto year 4 and 150000 thereafter upto year 6 and a total salvage value of 145000. At 15%, the PW can be calculated as below -

Thank You and Best of Luck :)