SPREADSHEET PROBLEMS IN LESSON 3.3-3.8
ANNUAL WORTH METHOD (6.39)
1. Three methods to dispose of nonhazardous waste have been developed—land application,
fluidized-bed incineration, and private disposal contract. Use AW analysis and an associated
scatter chart of AW versus i values to select the economically best alternative for interest rates
between i = 6 % and i = 24% in 3% increments. (Note: This is an extension of Problem 6.22.)
(6.22) An environmental engineer wants to evaluate three different methods for disposing of a
non-hazardous chemical waste: land application, fluidized-bed incineration, and private disposal
contract. Use the estimates below to help him determine which has the least cost at i = 10% per
year, on the basis of an (a) annual worth, and (b) present worth evaluation.
RATE OF RETURN
2. Cloey has just purchased new bedroom furniture from Haverty’s for a total of $10,000. She paid
20% down and, through a special promotional, she can pay off the $8000 in ten $800, no-interest
payments over the next 10 months. The smaller print at the bottom of the contract states that if
any of the payments is not paid in full (meaning $800) or late by one or more days, the remaining
unpaid balance will revert to an interest-based loan at the APR rate of 36% per year,
compounded monthly, to be paid out completely in a period of 5 months starting 1 month after
any infraction of the agreement. Cloey made the first three payments on time and in the full
amount; however, she could only pay $600 on time when the fourth payment was due.
a. Calculate the equal monthly payments that she must now pay, again in the full amount
and on time to avoid further penalties stated in additional “fine print” of the agreement.
b. How does the total amount she paid for the furniture over the 10-month period including
the APR-penalty interest compare with the original cost of $10,000? Assume Cloey
makes all five interest-bearing payments in full and on time.
B/C RATIO (9.57)
3. Consider the four independent projects outlined below. At 5% per year and a 15-year study
period, (a) determine which projects are acceptable, and (b) the value of the annual M&O cost to
make any nonacceptable project acceptable with a B/C ratio of at least 1.0. (Note: Utilize a logical
IF function somewhere in your analysis.)
PAYBACK ANALYSIS (13.43)
4. The National Potato Cooperative purchased a deskinning machine last year for $150,000.
Revenue for the first year was $50,000. Over the total estimated life of 8 years, use a
spreadsheet to estimate the remaining equivalent annual revenues (years 2 through 8) to ensure
breakeven by recovering the investment and a return of 10% per year. Costs are expected to be
constant at $42,000 per year and a salvage value of $10,000 is anticipated.