2. Find the interest rate that makes the NAW equal to 0.
NAW = Ð11000(P/A, i, 5) Ð 500(A/G, i, 5) Ð 3000 + 7000
i = 0: NAW = Ð2200 - 800 + 4000 = 1000
i = 12%: NAW = 62
i = 15%: NAW = Ð142 Interpolating: i = 13%
The cash flow associated with these assumptions is shown below.
c. The investment yields exactly the MARR.
a. The rate of return is 0% since the saving are exactly equal to the investment.
b. The rate of return is 20%, 200/1000 since the entire investment is returned after the five year period.
c. The rate of return is 20%, 200/1000 since the income stream is never ending.
d. The rate of return is 0% because the total return is exactly equal to the investment.