Rebuilding leads on IRR and replacing on NPV; equivalent annual value settles the tie in the GB550 Unit 7 capital budgeting analysis, where the two lives run ten and twenty years. Searches like "gb 550 unit 7 assignment example", "gb550 unit 7 sample" and "gb550 unit 7 example" land here.
What a finished GB550 Unit 7 capital budgeting analysis looks like
Roughly six pages. A two-column assumptions panel sets out the options. Rebuilding 60 hoppers at 310,000 dollars each costs 18.6 million, adds ten years of life and brings 3.05 million a year in after-tax cash flow, plus 0.6 million of scrap at the end. Replacing them with 45 jumbo hoppers at 880,000 each costs 39.6 million and returns 4.55 million a year for twenty years, with 4.0 million of salvage. At the 8.27 percent rate from Unit 6, rebuilding shows a net present value of 1.89 million, an internal return of 10.46 percent and payback in 6.10 years; replacing shows 5.01 million, 9.90 percent and 8.70 years. Equivalent annual values of 0.285 and 0.520 million settle the choice in favor of replacement, and the recommendation says so in its first line.
How a GB550 Unit 7 example is structured
The analysis first establishes that the two proposals are mutually exclusive and unequal in life, because both facts change which measure can decide. Each option's cash flow line is shown year by year. Net present value, internal rate of return, modified internal return, profitability index and payback follow for both, laid out in one comparison table so the disagreement between measures is visible at once. A section then explains why a twenty-year project cannot be compared directly with a ten-year one on net present value alone, and converts both to equivalent annual values, with a replacement-chain check that repeats the rebuild and reaches 2.74 million. A sensitivity paragraph asks how much rebuild cash flow would erase the gap, and how the ranking changes at a 10 percent rate. A recommendation, with its main risk named, closes the paper.
Exclusive and unequal
The paper states that the fleet can take one option, not both, and that their lives differ by a decade, before any measure is computed.
Five measures, one table
Net present value, internal and modified returns, profitability index and payback appear side by side, rebuilding ahead on three and replacing ahead on two.
Value per year
Dividing each net present value by its annuity factor gives 0.285 million a year for rebuilding against 0.520 million for replacing.
The chain check
Rebuilding twice in a row across twenty years reaches 2.74 million, still below replacement, confirming the annual comparison by a second route.
Where the answer flips
Rebuild cash flow would need to reach 3.285 million a year to tie, and at a 10 percent rate replacement's annual value turns slightly negative.
Where marks go in GB550 Unit 7
Comparing a ten-year project with a twenty-year one on raw net present value, without a word about the difference in life, is the analytical gap graders here look for first. Ranking by internal rate of return when the measures disagree, as the rebuild's 10.46 percent invites, earns a similar deduction. Discount rates that ignore the cost of capital the course has just built undermine every figure in the table. Payback reported as a decision rule rather than a liquidity note draws comment in many graduate sections. Measures listed with no statement of which governs leave the reader to choose. Sensitivity run on the discount rate alone, when the rebuild's cash flow is the shakier estimate, suggests the risk was not considered. Recommendations that omit the main assumption behind them read as incomplete, however clean the arithmetic.
Get a GB550 Unit 7 example written to your instructions
Share the two proposals from your Unit 7 case, the discount rate your instructor requires, and the rubric. Every option gets measured on each tool your prompt names, the disagreement between measures explained, and unequal lives handled where they arise. As a first custom sample it comes free, typically inside 24-48h.
GB550 Unit 7 questions, answered
When do unequal lives matter?
When projects are mutually exclusive and the shorter one would be repeated or replaced at the end of its life. Comparing raw net present values then tilts the verdict toward the longer project for reasons unrelated to its merit. Equivalent annual value and replacement chains both correct for it; the sample uses the first and checks with the second, and both favor replacing the barges.
Why does the higher IRR lose?
Because internal rate of return measures percentage return, not value, and says nothing about scale or duration. The rebuild earns 10.46 percent on 18.6 million for ten years; the replacement earns 9.90 percent on 39.6 million for twenty. At the firm's 8.27 percent cost of capital, the larger, longer investment creates more value each year, which is what the decision should maximize.
Should MIRR be included?
If the prompt lists it, yes, and it is often worth a line anyway. Modified internal return assumes cash flows are reinvested at the cost of capital rather than at the project's own rate, which usually makes it more realistic. In the sample it narrows the gap, 9.32 against 8.92 percent, but still favors rebuilding, so it does not settle the conflict by itself.