Engineering Economic Analysis

(Chris Devlin) #1
Difficulties in Solving for anInterest Rate 237

Aprojecthas a first cost of $120,000.Net revenuesbegin at $30,000in Year 1, and then increase by
$2000 per year. In Year 5 the facility is expanded at a cost of $60,000 so that demand can continue
to expand at $2000 per year. How many roots for the PW equation have a positive value fori?

$30K $32K $34K $36K $40K $42K $44K $46K $48K
t t t t t t t t t
0-1-2-3-4-5-6-7-8-9 ,.10

! -$22K ~ $~K - $38K
-$120K

Figure 7A-4 shows the spreadsheet calculations and the graph ofPW versusi.


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A B C D E F G
1 Year Cash Flow i pw

(^20) -120.00 -80% (^579646330) =$B$2 +NJ>V(D2,$B$3:$B$12)
3 1 30.00 -60% 735723
4 2 32.00 I -40% 17651
(^53) 34.00 II .....30% 1460
(^64) I 36.00. 0% (^210) r
(^75) -22.00 10% 73 ,i !I
(^86) 40.00 20% (^7) I
(^97) 42.00 I 30% -28
10 8 44.00 i 40% 48 II I
(^119) 46.00 50% 62
12 10 48.00 I 60% -71 !{!
(^13) i 70% -78 II
14 IRR 21.69% > 80% ,83
(^15) I 90% 87
(^16) ,,
17 200 II
18
150 I
(^19) ,
20 100 iI
(^21) p.,^50 -'
22 , 0 I ,<c
(^23) " --,50
24 -- =,':::I .:. :: ::II....,._ ">I'" - --- =, "'''' ..
-100 I" I I I
(^25) 0% 10% '20% 30% 40% 50%
(^26) - i 1-


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