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Present Worth Analysis

The document discusses four alternatives (A, B, C, D) for a present worth analysis using discounted cash flows. It calculates the present worth for each alternative using annuity and lump sum payments discounted at 12% over 10 years. Based on the results, Alternative A has the highest present worth of $8995.49 and annual worth of $1592.05, so it is selected as the preferred choice.

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Abigail V
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23 views3 pages

Present Worth Analysis

The document discusses four alternatives (A, B, C, D) for a present worth analysis using discounted cash flows. It calculates the present worth for each alternative using annuity and lump sum payments discounted at 12% over 10 years. Based on the results, Alternative A has the highest present worth of $8995.49 and annual worth of $1592.05, so it is selected as the preferred choice.

Uploaded by

Abigail V
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CO4 CPR

SOLUTION:
PRESENT WORTH ANALYSIS
PWA = -$150,000 + $27,000 (P/A, 12%, 10) + $20,000 (P/F, 12%, 10)
PWA = -$150,000 + $27,000 ¿ + $20,000 (1+0.12)-10
PWA = $8995.49

PWB = -$85,000 + $15,450 (P/A, 12%, 10) + $10,000 (P/F, 12%, 10)
PWB = -$85,000 + $15,450 ¿ + $10,000 (1+0.12)-10
PWB = $5515.68
PWC = -$75,000 + $14,500 (P/A, 12%, 10) + $6,000 (P/F, 12%, 10)
PWC = -$75,000 + $14,500 ¿ + $6,000 (1+0.12)-10
PWC = $8860.07

PWD = -$120,000 + $21,300 (P/A, 12%, 10) + $11,000 (P/F, 12%, 10)
PWD = -$120,000 + $21,300 ¿ + $11,000 (1+0.12)-10
PWD = 3891.46

PRESENT WORTH ANALYSIS: CHOOSE ALTERNATIVE A

ANNUAL WORTH ANALYSIS


PW A

AWA = P
( , 12 % , 10)
A

AWA = $ 8995.41
¿¿
AWA = $1592.05

PW B

AWB = P
( , 12 % , 10)
A

AWB = $ 5515.68
¿¿
AWB = $976.19
PW C

AWC = P
( , 12 % , 10)
A

AWC = $ 8860.07
¿¿
AWC = $1568.09
PW D

AWD = P
( , 12 % , 10)
A

AWD = $ 3891.46
¿¿
AWD = $688.73

ANNUAL WORTH ANALYSIS: CHOOSE ALTERNATIVE A

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