ENGG 303, October, 2016 1 ENGG 303 Engineering Economics and Evaluation Assignment No. 3* Due date: Tuesday November 1 st, 2016, 4:00 PM * Please show all the calculations and the procedure for solving the questions. If you are going to use computer for your calculations, please make sure to attach the corresponding graphs and tables. 1. Calculate the rate of return for following cash flow: (25 pts) Year Cash flow 0 -$640 1 0 2 +$100 3 +$200 4 +$300 5 +$300 2. Consider the following two alternatives: Year A B 0 -$2,000 -$2,000 1 +$800 +$1,100 2 +$800 +$1,100 3 +$800 +$1,100 If the minimum attractive rate of return is 5%, which alternative should be selected? (30 pts) 3. Two mutually exclusive alternatives of A and B have both useful lives of 5 years. For Alternative A, there is an initial cost of $2,500 and annual benefits of $746. For Alternative B, there is an initial cost of $6,000 and annual benefits of $1,664. By following each of the following methods, define which alternative should be chosen? (45 pts) i. Present Worth Analysis (the interest rate is 8%) ii. Annual Cash Flow Analysis (the interest rate is 8%) iii. Rate of Return Analysis (Minimum Attractive Rate of Return is 8%)

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