Engineering Economic Analysis

A . These argon the cash feast pros for the four r fireer proposals of IME . Cash give ears are in 1000 and the time intervals are six months each .Beca procedure the company only has 3 .5M to seat on its expansion toils the company cannot pursue all of these stand outs at once . This is because the summarized in the following tableProposal A 1 .0 MB 2 .0 MC 200 ,000D 1 .0 M With the 3 .5 M budget , the following combined options are realizable . All options exhaust the budget to the fullestProject Proposals Involved Alpha A , B C 3 .2 MBeta A , D C 2 .2 MA project that involves doing proposals B , C and D is not included as D is a alternate(a) for B . Hence , proposal B and proposal D cannot both(prenominal) be done . The cash flow diagrams for both projects are shown belowAnd finally , we draw the simplified cash flow pros for the two projectsB . To solve for the best project finance chic , we project all cash flows in the leash projects to the wipeout of the 6th month interval . With a compound pursuit rate of 10 , our formula for projecting the cash flows to the end of 36 months is the following In this formula , Pn represents the cash flow for the nth periodSolving for the net future expenditure for all three projects , we get the followingProject Net emerging WorthAlpha 1 ,409 ,596Beta 121 ,081We see that from a financial standpoint , Project Alpha is the near honor for IME . Thus it should be the finance committee s recommendation that IME use up the available 3 .5 Million on proposals A , B and CC . The director might opt to take the restriction of proposal D being a respite for proposal B . In doing so , IME will be open to pursue both project B and D at the same time .

Seeing that the cash outgo for doing both would be 3 .2 M 2 .2 M for proposal B and C 1 M for project D , it is certainly within the budget of IME to pursue both avenues at the same time . Let us title this project of doing proposals B C and D project Charlie . We flat draw up the cash flow diagram for project CharlieAnd the simplified cash flow diagramTo compute the financial egress of project Charlie , we redo the computation for the net future worth of all cash flows projected to the end of the 36th month using the same formula that we used in social occasion B Doing so depicts the following future worthProject Net Future WorthAlpha 1 ,409 ,596Beta 121 ,081Charlie 1 ,855 ,535We see then that project Charlie is the most profitable of all other possible options . Thus plain performing proposals B and D together will yield the best profit for IMEReferencesSullivan , William G , James A . Bontadelli , and Elin M...If you indispensableness to get a full essay, order it on our website: Ordercustompaper.com

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