Question

Answer the following three questions:

5A.) In Unit 9 we looked at several various analysis techniques – briefly explain when each technique should be used AND if it is an approximate or exact method of the solution? (3 points)

• Payback
• Future Worth
• Benefit/Cost Ratios

5B.)  Payback Using the cost and benefits data for four different alternatives in table below, find the best alternative using the payback period analysis. MARR=X%  (2 points) Solve by hand or in Excel.

Year	A	B	C	D
0	-$9,000	-$12,000	-$10,000	-$12,000
1	2,000	3,500	0	0
2	2,000	0	1,000	-2,000
3	2,000	3,000	2,000	0
4	2,000	3,500	3,000	18,000
5	1,000	0	4,000	0
6	3,000	3,000	5,000	0

Variable X: MARR between 6% and 9%

5C.)  B/C Ratio: Given the data for two alternatives, choose the better alternative using the B/C ratio analysis. MARR = 8%. A disbenefit is a reduction in benefits. (3 points) Solve by hand or in Excel.

Alternative	X	Y
First Cost	$100,000	$140,000
Operating Costs/year	50,000	60,000
Benefits/year	100,000	120,000
Dis-benefits/year	30,000	25,000
Life in years	5	10

        

No Variable Amount for part 5C.

Answer 1

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