The second roaster wins on net present value, 878,370 dollars, until its annual inflows slip 2.7 percent; this AC505 Unit 9 capital investment analysis finds that break point. Searches like "ac 505 unit 9 assignment example", "ac505 unit 9 sample" and "ac505 unit 9 example" land here.
What a finished AC505 Unit 9 capital investment analysis looks like
Roughly three pages of decision memo, backed by a cash flow exhibit and a ranking table. The exhibit lays out each project: the sorter at 1,200,000 dollars returning 330,000 a year for seven years; the roaster line at 2,800,000 returning 560,000 a year for ten years plus 200,000 of salvage; heat recovery at 900,000 saving 190,000 a year for ten. At 9 percent the table reports net present values of 460,874, 878,370 and 319,355, internal rates of return of 19.68, 15.55 and 16.54 percent, profitability indexes of 1.384, 1.314 and 1.355, and paybacks of 3.6, 5.0 and 4.7 years. Because the roaster cannot share the budget with the other two, the choice is roaster alone or sorter plus heat recovery.
How a AC505 Unit 9 example is structured
The memo recommends first and then earns the recommendation. Measures are computed for each project, and the memo explains why they disagree: internal rate of return and profitability index favor the smaller projects, while net present value favors the roaster's larger absolute gain. The capital limit turns the ranking into a choice between bundles, since the roaster at 2,800,000 dollars leaves too little for anything else, and the bundle comparison is 878,370 against 780,229. A sensitivity section then targets the assumption that decides the ranking: the roaster's inflows rest on fall demand, the 400 hours of holiday orders currently turned away, growing every year. Inflows of 544,708 a year tie the two bundles, a drop of 2.73 percent. The memo recommends the sorter and heat recovery unless the sales team can document the fall demand with signed forecasts.
Three projects, one budget
An optical sorter, a second roaster line and exhaust heat recovery compete for 3,000,000 dollars. The roaster alone uses 2,800,000, so the realistic choices are the roaster by itself or the other two together at 2,100,000.
Rate against dollars
Net present value ranks the roaster first; internal rate of return and the profitability index rank the sorter first and heat recovery second. The memo explains the split as scale: the roaster earns the most dollars on the most capital.
Bundles, not projects
The roaster alone produces 878,370 dollars of net present value; the sorter plus heat recovery produce 780,229. On base assumptions the roaster wins by about 98,000, a margin the memo then tests.
The assumption that ranks them
Roaster inflows depend on fall demand growing into the new capacity. At 544,708 dollars a year, 2.73 percent below the base case, the two bundles tie. At 90 percent of base inflows the roaster's value falls to 518,982.
Gas prices and the heat project
Heat recovery savings rest on natural gas prices. At 80 percent of the assumed savings its value drops to 75,484 dollars, still positive. The memo judges this risk smaller than the roaster's, because gas contracts are visible a year ahead.
A recommendation with a condition
Approve the sorter and heat recovery now. Revisit the roaster when the sales team documents fall demand with signed customer forecasts covering at least the first [three] years of its inflows.
Where marks go in AC505 Unit 9
When projects are ranked on one measure with no account of why the measures disagree, the analysis stalls early, since AC505 typically wants the conflict between net present value and rate-based measures understood, not just computed. Under a capital limit, ranking individual projects instead of feasible bundles gives the wrong comparison, and a grader will usually test whether the budget was actually respected. Sensitivity earns the most when it targets the assumption that decides the ranking and reports the break-even value, here 544,708 dollars of roaster inflows, rather than moving every input ten percent. Discount rates need a stated source. Salvage and working capital left out of the cash flows cost computation marks. A recommendation that follows the highest number without weighing how fragile it is reads as arithmetic, not judgment.
Get a AC505 Unit 9 example written to your instructions
Capital problems turn on cash flows and limits, so list the projects your Unit 9 case describes, each one's flows, the discount rate and any budget cap, and attach the rubric. Every measure the instructions require is computed, feasible bundles compared and the deciding assumption pushed to break-even in 24-48h, and the first request carries no charge.
AC505 Unit 9 questions, answered
Why do NPV and IRR rank projects differently?
Mostly because of scale and timing. Internal rate of return measures percentage return, so a small project with a high rate can outrank a large one that adds more total value. Net present value measures dollars added at the required return. When projects are mutually exclusive or capital is limited, the analysis should explain the conflict and usually favors the measure that matches the firm's real constraint.
How should a capital limit be handled?
List the combinations of projects that fit within the budget and compare their total net present values. The profitability index helps rank divisible projects, but when projects are all or nothing, a high index can mislead, as it does here. Stating the feasible bundles explicitly shows the grader the limit was respected rather than noted and ignored.
Which assumption should the sensitivity analysis test?
The one that decides the ranking. Find the input whose change would reverse the recommendation, compute the value at which the alternatives tie, and judge how likely that value is. Moving every input by the same percentage produces tables but little insight. A single break-even figure, tied to evidence about the underlying assumption, is what usually earns the analysis marks.