Question

You have available two equal-lived, mutually exclusive investment alternatives with cash flows as depicted below. The alternative planning horizon is 14 years and MARR = 78 . what is the PW_2-1?

	Alternative1 (SR)	Alternative2 (SR)
Initial investment	36,244	89,650
Annual return	5,076	11,807
Salvage value	3,395	6,797

Answer 1

MARR Iis not clearly visible in question. Best possible assumption is 7.8% and 1%

Solution when MARR is 7.8%.

A	B	C	D	E	F
2	Horizon (In years)	14
3	MARR	0.078
4
5		Alt 1	Alt 2
6		Calculations	Amount	Calculations	Amount
7	Initial Investment	36244	36244	89650	89650
8	Annual Return	5076	5076	11807	11807
9	Salvage Value	3395	3395	6797	6797
10
11	PVAF (@7.8%, N: 14 )	=(1-((1+$C$3)^-$C$2))/($C$3)	8.34087662183498	=(1-((1+$C$3)^-$C$2))/($C$3)	8.34087662183498
12	PV of Annual Return	=C8*C11	42338.2897324344	=E8*E11	98480.7302740056
13
14	PVIF (@7.8, N: 14)	=1/(1+$C$3)^$C$2	0.349411623496872	=1/(1+$C$3)^$C$2	0.349411623496872
15	PV of Salvage Value	=C9*C14	1186.25246177188	=E9*E14	2374.95080490824
16
17	PV of Cash Inflow	=C12+C15	43524.5421942062	=E12+E15	100855.681078914
18
19	Present Worth	=C17-C7	7280.54219420624	=E17-E7	11205.6810789138

Solution when MARR is 18%

A	B	C	D	E	F
2	Horizon (In years)	14
3	MARR	0.18
4
5		Alt 1	Alt 2
6		Calculations	Amount	Calculations	Amount
7	Initial Investment	36244	36244	89650	89650
8	Annual Return	5076	5076	11807	11807
9	Salvage Value	3395	3395	6797	6797
10
11	PVAF (@18%, N: 14 )	=(1-((1+$C$3)^-$C$2))/($C$3)	5.00806151960626	=(1-((1+$C$3)^-$C$2))/($C$3)	5.00806151960626
12	PV of Annual Return	=C8*C11	25420.9202735214	=E8*E11	59130.1823619911
13
14	PVIF (@18, N: 14)	=1/(1+$C$3)^$C$2	0.0985489264708741	=1/(1+$C$3)^$C$2	0.0985489264708741
15	PV of Salvage Value	=C9*C14	334.573605368617	=E9*E14	669.837053222531
16
17	PV of Cash Inflow	=C12+C15	25755.49387889	=E12+E15	59800.0194152136
18
19	Present Worth	=C17-C7	-10488.50612111	=E17-E7	-29849.9805847864

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