Complete the following problems. You must show your work on the math problems to get full credit. Every student is responsible for completing their own responses to the following problems.
- Consider these three projects:
Project A Project B Project C
Investment at n=0: $250,000 Investment at n=0: $275,000 Investment at n=0: $300,000
n = 1 $50,000 $100,000 $200,000
n = 2 $75,000 $50,000 $150,000
n = 3 $100,000 $100,000 $100,000
n = 4 $125,000 $75,000 $50,000
n = 5 $150,000 $125,000 $0
Calculate the profitability index for Projects A, B, and C at an interest rate of 12%.
- Cheney Recreation and Parks Department is considering two mutually exclusive proposals for a new baseball complex in the center of Cheney, Washington:
Seating Capacity Annual Benefits Annual Costs Required Investment
Design A 4,000 people $200,000 $75,000 $750,000
Design B 6,500 people $300,000 $150,000 $1,000,000
Determine which baseball complex would be best according to benefit-cost analysis at an interest rate of 7% over a period of 25 years.
- A city government is considering two types of town-dump sanitary systems. Design A requires an initial outlay of $300,000 with annual operating and maintenance costs of $175,000 for the next 20 years; design B calls for an investment of $400,000 with annual operating and maintenance costs of $150,000 per year for the next 20 years. Fee collections from the residents would be $200,000 per year. The interest rate is 7%, and no salvage value is associated with either system.
By the profitability index PI(i)), which of the two systems would be the most profitable?
- A city government is considering adding some parks and recreational additions to the city. It will cost $10,000 to develop a plan for the additions. The anticipated annual benefits and costs for the new parks and recreational additions to the city are as follows:
Annual benefits: $27,500
Annual costs: $22,500
If the city government uses a discount rate of 8% and a study period of 30 years, is this project justifiable according to benefit-cost analysis?
Text Size: All of the text in this assignment needs to be set in 10 or 12-point size. Please resist the temptation to mix and match point sizes. If you doubt your applications intentions, just select all of your text and insure that it is in 10 or 12-point size.
Margins: The right and left side can be set for ½” (0.5) margins. Set the top and bottom margins to one (1”). The only text that ends up on the outside of the one-inch margin is the page number.
Name Block: Place the name block in the upper left corner of the page. In MS Excel, use the left side cells. In this class the name block only needs to be on the first page. Put your name first, then the class title and then the date. Example:
TECH 452 –Engineering Economics
Title: Skip one cell and place the title on the left, just below the name block. The title for this assignment is “Homework 6”.
Spelling/Grammar Checking: Remember to do your spelling and grammar checking before turning your assignments in. When doing the spelling/grammar checking keep in mind that some words such as mush and must, woods and words, or here and cow, will not be caught by either check. To correct these problems, you will need to proofread your work.
Page Numbers: Any homework that has more than one page needs to have page numbers on it. Please place your page numbers on the bottom of the page. In MS Excel, use the footer selection and place the page number in the bottom center or bottom right of the page.
Problem Number: List each problem’s number on the left, placing a blank cell above it.
State or summarize the Problem: For this assignment,you may state the problem either exactly as it appears in the book or you may summarize the all the values, terms and percentages. This is to help insure that you use the correct values in your calculations. If you chose to summarize, this will count as stating the given. You will need to break long text up between cells so that you will stay with-in the printing boundaries of the page.
State the Given: Skip one cell and write the word “Given:” Follow that with what is known from the problem. If the problem has multiple parts, place the letter of each part before the “Given”. If the problem has a table, then reproduce the table.
Solve the Problem: Show your work in solving the problem.