1. PE 1 Economic Analysis ALTERNATIVE 1
Question 1-5
Reoccurring Lease payment
$300 per month * 12 months= $3,600 per year
MIDNIGHT
DAY 0
MIDNIGHT
DAY 365
MIDNIGHT
DAY 730
MIDNIGHT
DAY 1,095
MIDNIGHT
DAY 1,460
MIDNIGHT
DAY 1,825
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5
,095
1, ,460
1, ,825 $0
$3,600
$3,600
$3,600
$3,600
$3,600

2. Question 5 fill out Format A for Alternative 1
Leasing Computers
Computers needed to handle manual work
Alternative 1
5 years $0 $0 $0
1.000 $0 1 $0
$3,600
$3,600
0.909
$3,272 2 $0
$3,600
$3,600
0.826
$2,974
Question 5 fill out Format A for Alternative 1 3 $0
$3,600
$3,600
0.751
$2,704 4 $0
$3,600
$3,600
0.683
$2,459 5 $0
$3,600
$3,600
0.621
$2,236 $0
$18,000
$18,000
3.790
$13,644
$13,644
$3,600 $0 $0
$13,644
$3,600

3. PE 1 Economic Analysis ALTERNATIVE 2 Buying Equipment QUESTION 1-5
YR 0 = $11,500 = $10,000 initial outlay + $1,500 installation
End of YR 1 = $500= one time training cost
Recurring end of each year = $1,000 annually for maintenance
End of year YR 5 Terminal Value / Salvage value (-$2,000)
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5
$11,500
$500
$1,000
$1,000
$1,000
$1,000
$1,000
($2,000)

4. Question 5 fill out Format A for Alternative 2
Buying Computers
Computers needed to handle manual work
Alternative 2
5 years
$11,500 $0
$11,500
1.000
$11,500 1
$500
$1,000
$1,500
0.909
$1,364 2 $0
$1,000
$1,000
0.826
$826
Question 5 fill out Format A for Alternative 2 3 $0
$1,000
$1,000
0.751
$751 4 $0
$1,000
$1,000
0.683
$683 5 $0
$1,000
$1,000
0.621
$621
$12,000
$5,000
$17,000
3.790
$15,745
$15,745
$4,154
$2,000
0.621
($1,242)
$14,503
$3,827

5. Question 6 (Line 10b & 12b) Uniform annual cost
PE 1 Economic Analysis ALTERNATIVE 2 Buying Equipment
Question 6 (Line 10b & 12b) Uniform annual cost
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5
$10,000
$500
$1,000
$1,000
$1,000
$1,000
$1,500
$1,000
Line 10b= line 10a (Total Discounted annual cost or Total Project Cost discounted) / cumulative factor
($2,000)
When we are doing line 10b & 12b we are trying to “force” our final answer into a series of even annual amounts. In line 10b we do NOT include any terminal / salvage value. In line 12b we DO include any terminal / salvage value.
In this case, it is not as easy so we have to “force” it into an annual series
Line 10b = $15,745 /
3.790
= $4,154
Line 12b= line 12a (Net total project cost discounted) / cumulative factor
Line 12b = $14,503/
3.790
= $3,827

6. PE 1 Economic Analysis ALTERNATIVE 2 Buying Equipment
Question 6 (Line 10b) Uniform annual cost WITHOUT Terminal Value
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5
$10,000
$500
$1,000
$1,000
$1,000
$1,000
$1,500
$1,000
$11,500
$1,500
Total Discounted annual cost or Total Project Cost discounted = $15,745 (From Line 10a on Format A for Alternative 2)
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5 $0
$4,154
$4,154
$4,154
$4,154
$4,154
Total Discounted annual cost or Total Project Cost discounted = annual amount * Column B factor
= $4,154 * 3.790
= $15,744 (how it looks if “forced” into equal annual amounts w/o Terminal Value)

7. PE 1 Economic Analysis ALTERNATIVE 2 Buying Equipment
Question 6 (Line 12b) Uniform annual cost WITH Terminal Value
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5
$10,000
$500
$1,000
$1,000
$1,000
$1,000
$1,500
$1,000
($2,000)
-$2,000
$11,500
$1,500
($1,000)
-$1,000
Net total project cost discounted = $14,503 (From line 12a on Format A for Alternative 2)
YR 0
YR 1
YR 2
YR 3
YR 4
YR 5 $0
$3,827
$3,827
$3,827
$3,827
$3,827
NPV = annual amount * Column B factor
= $3,827 * 3.790
Net total project cost discounted = $14,504 (how it looks if “forced” into equal annual amounts with Terminal Value)