Question
Use the following cash flow for problems a through g.
In year 0 you paid $50000 for a machine
In years 1 through 5 you made $10000 per year from the machine
In year 3 you had to pay an additional $10000 to keep the machine going
In year 5 you sold the machine for $20000
a. Draw the cash flow diagram for this problem
b. Calculate the Present Worth (PW) at 10% interest
c. Calculate the Future Worth (FW) at 10% interest.
d. Calculate the Annual Worth (AW) at 10% interest.
e. What is the payback period?
f. Is this a viable project?
g. If you solve for an Internal Rate of Return (IRR) using a present worth equation, what value do you set the present worth to in order to solve the equation?
Jack Black, engineer extraordinaire, had just returned from taking a 30-page exam in his engineering management graduate program. His boss, Lucy (who certainly had a thing for diamonds and atmospheric sciences) asked Joe to evaluate a new project. Because Jack was quite discombobulated from his testing extravaganza he had a tough time. He persevered and brought Lucy two answers. A future worth that was > 0 and a present worth that was < 0. What should Lucy say to Jack?
What is the present worth, future worth, and annual worth of the following project if i = 10% per year? Hint: 1) You might want to consider the 5 as an A for all 8 years and have some additional + or - cash flows in years 4, 5, and 8. OR 2) Use NPV function in Excel for years 1 thru 8 and subtract 25.
| year |
Cash Flow
|
| 0 |
-25 |
| 1 |
5 |
| 2 |
5 |
| 3 |
5 |
| 4 |
1 |
| 5 |
7 |
| 6 |
5 |
| 7 |
5 |
| 8 |
11 |
You have a different group of technicians with a different learning curve. Their first item took 50 minutes and you went to lunch (very long) and didn't measure their 2nd or 3rd item's time.
You did get the 4th item's time which was 25 minutes. What is this group's learning curve slope parameter? For +1, does your answer look like any other "sort of" common number you know?
Here is a NEW and DIFFERENT type of learning curve table. What is the value of n in the equation
Zu = Kun for this table?
Number of Units Z/K
1 1
3 0.9
9 0.81