CIVL 2812—Project Appraisal (Semester 2, 2019)
CIVL 2812—Project Appraisal (Semester 2, 2021)
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Tutorial 4 – Answers
ESSENTIAL QUESTIONS
Solution 5-42
The CFD is from the lender’s viewpoint. Equating outflows to inflows:
$350 + $350(P/A, i′, 11) = $375(P/A, i′, 12)
i′ = 7.14%per month
The effective annual interest rate is (1.0714)12 – 1 = 1.288 (128.8%).
Jess’s wife is correct, and in fact, the U.S. military is moving to correct predatory lending practices near
its installations.
Solution 5-52
Solution 6-4
Assume all units are produced and sold each year.
AWA(20%) = −$30,000(A/P,20%,10) + 15,000($3.50 − $1.00) − $15,000 = $15,345
AWB(20%) = −$60,000(A/P,20%,10) + 20,000($4.40 − $1.40) − $30,000 +
$20,000(A/F,20%,10)
= $16,460
AWC(20%) = −$50,000(A/P,20%,10) + 18,000($4.10 − $1.15) − $26,000 +
$15,000(A/F,20%,10)
= $15,753
Select Design B to maximize the annual worth.
CIVL 2812—Project Appraisal (Semester 2, 2021)
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ESSENTIAL QUESTIONS
Solution 6-76
Savings per plan = $40,000 − $30,000 = $10,000/year Let X
= number of planes operated per year.
$500,000 = $10,000 (X) (P/A,10%,15) + $100,000 (P/F,10%,15)
𝑋 =
$500,000−$100,000∗0.2394
($10,000∗7.6061)
= 6.26
X = 7 planes per year
Select a)
CIVL 2812—Project Appraisal (Semester 2, 2021)
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EXTENSION QUESTIONS
Solution 5-48
CIVL 2812—Project Appraisal (Semester 2, 2021)
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EXTENSION QUESTIONS
Solution 5.53
CIVL 2812—Project Appraisal (Semester 2, 2021)
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EXTENSION QUESTIONS
Solution 5-60
(a) In all three cases, IRR = 15.3%. This is true for EOY 0 as a reference point in time, and also for EOY 4 as a
reference point in time.
(b) PW1(10%) = $137.24 at EOY 0
PW2(10%) = $137.24 at EOY 4
PW2(10%) = $93.73 at EOY 0
PW3(10%) = $686.18 at EOY 4
PW3(10%) = $468.67 at EOY 0
Select (3) to maximize PW(10%). However, the PW(IRR=15.3%) would be zero for all three situations.
CALCULATION FOR a)
Note: The same P/A value (shown by arrow signs)
CIVL 2812—Project Appraisal (Semester 2, 2021)
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EXTENSION QUESTIONS
Calculations for (b)
Based on the above results (EOY ZERO), the 3rd situation provides the best PW value. However the PW
(IRR = 15.25) will be zero for all three situations.
CIVL 2812—Project Appraisal (Semester 2, 2021)
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EXTENSION QUESTIONS
Solution 6-7
Solution 6-24