107 777
Assignments Done
100%
Successfully Done
In July 2024

# Answer to Question #253180 in Civil and Environmental Engineering for nato

Question #253180
A company is considering constructing a plant to manufacture a proposed new product. The land costs
$300,000, the building costs$600,000, the equipment costs $250,000, and$100,000 additional working
capital is required. It is expected that the product will result in sales of $750,000 per year for 10 years, at which time the land can be sold for$400,000, the building for $350,000, and the equipment for$50,000. All of the working capital would be recovered at the EOY 10. The annual expenses for labor,
materials, and all other items are estimated to total \$475,000. If the company requires a MARR of 15%
per year on projects of comparable risk, determine if it should invest in the new product line. Use the
AW method.
1
2021-10-19T14:45:02-0400

Modified B-C ratio = (PW of annual benefits - PW of annual expenses) / (Land + Building + Equipment + Working capital - PW of salvage value)

"= [(750,000 - 475,000) \\times P\/A(15%, 10)] \/ [300,000 + 600,000 + 250,000 + 100,000 - (400,000 + 350,000 + 50,000) x P\/F(15%, 10)]\\\\\n\n= (275,000\\times 5.0188) \/ [1,250,000 - (800,000 \\times0.2472)]\\\\\n\n= 1,380,170 \/ (1,250,000 - 197,760)\\\\\n\n= 1,380,170 \/ 1,052,240\\\\\n\n= 1.31\\\\"

Since Modified B-C Ratio is greater than 1, Project is acceptable

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!