Instructions:
Ο This assignment contains 2 questions. Answer all 2 questions.
Ο This assignment is to be attempted and submitted individually.
Ο Each assignment solution should be prepared using a professional word processor, i.e., text
needs to be typed (not written by hand or using a stylus). Other software packages can also be
utilized especially for documenting mathematical equations (e.g., Math Type)
Ο Wherever you are required to automate the solution using a stipulated approach, e.g., computer
language (Matlab, or Python), please do so to earn the allocated grade.
Ο Each assignment solution should have a cover page indicating student credentials, the subject,
the instructor, the University Program/Course details, assignment details, etc.
Ο The softcopy of the PDF submitted should adhere to the following naming convention such
that it is tracked and graded. File Name should be in this format:
firstname_lastname_studentnumber.pdf
QUESTION ONE [25 MARKS]
Three mutually exclusive alternatives are being considered for the production equipment at a tissue
paper factory. The estimated cash flows for each alternative are given below. The effective interest
rate and Minimum Attractive Rate of Return [MARR] are 6% per year, and 20% per year
respectively.
Parameter
Capital Investment
Annual Revenues
Annual Expenses
Market Value
Useful Life (Years)
Equipment A
Equipment B
$2,000
$4,200
$3,200
$6,000
$2,100
$4,000
$100
$420
5
10
Equipment C
$7,000
$8,000
$5,100
$600
10
Conduct an External Rate of Return [ERR] analysis and recommend which equipment alternative,
if any, should be selected? Please clearly state all your assumptions. Also, present all cash flow
diagrams in your solution. Adhere to all conventions.