Investments and Project Acceptance:

1. A company that manufactures magnetic membrane switches is investigating two production options

that have the estimated cash flows shown ($1 million units). Which one should be selected on the basis

of a present worth analysis at 10% per year?

2. A metallurgical engineer is considering two materials for use in a space vehicle. All estimates are

made. (a) Which should be selected on the basis of a present worth comparison at an interest rate of

12% per year? (b) At what first cost for the material not selected above will it become the more

economic alternative?

3. Machines that have the following costs are under consideration for a robotized welding process. Using

an interest rate of 10% per year, determine which alternative should be selected on the basis of a

present worth analysis. Show (a) hand calculations

4. Ashley Foods, Inc. has determined that any one of five machines can be used in one phase of its chili

canning operation. The costs of the machines are estimated below, and all machines are estimated to have a 4-

year useful life. If the minimum attractive rate of return is 20% per year, determine which machine should be

selected on the basis of a rate of return analysis.