Prject : 3 should be accepted with NPV = $ 48,373.92
Working notes for the above answer is as under
First of all we will find NPV of the project as follow
Plan -1
Year
Initial
Cost
Annual
Benefit
MARR
Factor@10 %
Prasent
Value
0
-220,000
1
-220000
1
39000
0.9090909
35454.55
2
39000
0.8264463
32231.4
3
39000
0.7513148
29301.28
4
39000
0.6830135
26637.52
5
39000
0.6209213
24215.93
6
39000
0.5644739
22014.48
7
39000
0.5131581
20013.17
8
39000
0.4665074
18193.79
9
39000
0.4240976
16539.81
10
39000
0.3855433
15036.19
19638.12
Plan -2
Year
Initial
Cost
Annual
Benefit
MARR
Factor@10 %
Prasent
Value
0
-100,000
1
-100000
1
15000
0.9090909
13636.36
2
15000
0.8264463
12396.69
3
15000
0.7513148
11269.72
4
15000
0.6830135
10245.2
5
15000
0.6209213
9313.82
6
15000
0.5644739
8467.109
7
15000
0.5131581
7697.372
8
15000
0.4665074
6997.611
9
15000
0.4240976
6361.464
10
15000
0.3855433
5783.149
-7831.49
Plan -3
Year
Initial
Cost
Annual
Benefit
MARR
Factor@10 %
Prasent
Value
0
-265,000
1
-265000
1
51000
0.9090909
46363.64
2
51000
0.8264463
42148.76
3
51000
0.7513148
38317.05
4
51000
0.6830135
34833.69
5
51000
0.6209213
31666.99
6
51000
0.5644739
28788.17
7
51000
0.5131581
26171.06
8
51000
0.4665074
23791.88
9
51000
0.4240976
21628.98
10
51000
0.3855433
19662.71
48372.92
Plan -4
Year
Initial
Cost
Annual
Benefit
MARR
Factor@10 %
Prasent
Value
0
-180,000
1
-180000
1
26000
0.9090909
23636.36
2
26000
0.8264463
21487.6
3
26000
0.7513148
19534.18
4
26000
0.6830135
17758.35
5
26000
0.6209213
16143.95
6
26000
0.5644739
14676.32
7
26000
0.5131581
13342.11
8
26000
0.4665074
12129.19
9
26000
0.4240976
11026.54
10
26000
0.3855433
10024.13
-20241.3
So NPV of all project as per MARR 10% are as follow
Project
NPV
Project -1
19638.1171
Project -2
-7831.4934
Project -3
48372.9224
Project -4
-20241.255
From the above calculation we can see that, project -3 has highest NPV so the project-3 will be accepted
