7- Mr. Goodman, a friend of yours, is asked to invest in the following project: installation and
operation of a facility with a life span of five years. The initial investment is $90M. It will have a net
profit of $25M/Yr the first two years and of $30M/Yr in years 3,4, and 5. At the end of year 5, it has to
be disposed of at a cost of $10M with no resale value. He also has the option of investing the same
money in a project that will bring him $29M per year. If he has the money and his opportunity cost of
money is 10% (I=10%), which proposal do you advise him to accept? Why? Explain.
8- A developer is given the following two options for the purchase of a property:
a. Pay $100,000
b. Pay $30,000 at the end of each year, starting one year after purchase, for the next five years.
Which option should he take?
9- In engineering economic analysis of projects, when using Net Present Worth or Benefit/Cost ratio
we have to equalize the lives of the projects. This equalization is not necessary when using EUAW
methods. Why? Can you show this using a cash flow diagram?