Question

Please use excel and demonstrate the formulae used.

A new project will cost $32,356 initially and will last for 7 years, at which time its salvage value will be $2,500. Annual revenues are anticipated to be $15,000 per year. For a MARR of 6% percent every year, plot a sensitivity graph for annual worth versus initial cost, annual revenue, and salvage value, varying only one parameter at a time, each within the range of +/- 50% increments of 10%.

Answer 1

Initial investment, C₀ = 32,356

n =7

i = MARR = 6%

Annual cash flows, C = 15,000

Salvage value, S = 2,500

AW = [S x (1 + i)^-n - C₀] x i / [1 - (1 + i)^-n] + C

AW vs C₀

S = 2,500; C = 15,000

Hence, the relationship is : AW = [2,500 x (1 + 6%)^-7 - C₀] x 6% / [1 - (1 + 6%)^-7] + 15,000

AW vs. C

AW vs S