Given the following information, which of the mutually exclusive alternatives should be chosen? Use the PW and AW methods for all options if the MARR is 10%. Investment cost Annual expenses Annual revenues Salvage value Useful life A 28,000 15,000 23,000 6,000 10 B 55,000 13,000 28,000 8,000 10 C 40,000 22,000 32,000 10,000 10

Given the following information, which of the mutually exclusive alternatives should be chosen? Use the PW and AW methods for all options if the MARR is 10%. Investment cost Annual expenses Annual revenues Salvage value Useful life A 28,000 15,000 23,000 6,000 10 B 55,000 13,000 28,000 8,000 10 C 40,000 22,000 32,000 10,000 10

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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What is the best alternative using incremental Analysis? Use MARR = 15% A B C Capital Investment $ 2,000 7,000 4,200 Annual Revenues 3,200 8,000 6,000 Аппиal Costs 2, 100 5, 100 4,000 Market Value at the end of useful life 100 600 420 Useful Life (in years) 10 10 10 The correct ranking of Alternative is Blank 1 Select Alternative Blank 2 Note: Do not put comma, unit of measure and limit your answer to two decimal places. Ex: A-B-C
a. The AW is the value of all cash flows converted to an equivalent uniform annual series of cash flows over a 5-year period b. The AW may provide a different decision than when present worth or future worth is calculated c. The AW will result in the same decision as the present worth or future worth analysis d. The AW is rarely used by individuals to determine the value of their investment portfolio in the future, such as for retirement
2. Two alternatives, a flexible manufacturing cell and fixed automation, have different cost and revenue characteristics as follows: Flexible Cell Fixed Automation Investment S2,500,000 б уears S800,000 in first year; increasing by $100,000 each year thereafter $300,000/year $1,500,000 3 years S800,000/year Life Gross cash savings s100,000 in the first year; decreasing to S80,000 in second year and S70,000 in third year Cash disbursement MARR 20% 20% Assuming "repeatability" and service needed for 6 years, show which alternative is preferred using the method of rate of return.
110 0 Le000 & (0) A 200 B 3000 2000 らoo0 2800 5000 9f MARR=SI. MARR=81. O x & Y ? MARR = 101 Initial Cost Annual benefit 95|120 Sal vage Value 50 150 use bul libe DO Nothinglon) 3. 200 700 6 yean 12yng
When assessing mutually exclusive alternatives using Present Worth Analysis, which alternative/alternatives should be selected? a. Select none unless all PW are positive b. Select all with positive PW c. Select the alternative with the most positive PW d. Discard the negative PW and select all with positive PW In assessing an alternative, the capital recovery is found to be $ -2.47 (millions). What is this proper interpretation of this number? a. annually the alternative must have net revenues of at least $2.47 to recover the initial cost at a required MARR b. the alternative will lose $ 2.47 annually c. The AW is $ -2.47 d. The alternative will recover $ -2.47 annually once in operation
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Need answers ASAP... The annual worth can be calculated from the alternative’s: a. either ( a) or ( b) b. future worth by multiplying by ( F/A, i, n) c. all of the above d. present worth by multiplying by ( A/P, i, n)
You are charged with choosing a vendor to produce a new software that is going to benefit your company. The project has a life cycle of 8 years and MARR of 8% annual interest. Part a.) Draw the cash flow diagram for each vendor. Part b.) Calculate a PW cost for each vendor. Part c.) Indicate which vendor you would choose. Task Development Programming Operation Support Vendor M Cost, $ 200,000 150,000 42,000 20,000 40,000 30,000 Time Frame Now Years 1-4 Now Years 1-3 Years 1-8 Years 1-8 Vendor N Cost, $ Time Frame 70,000 60,000 45,000 50,000 35,000 Now Now Years 1-5 Years 1-8 Years 1-8 Vendor O Cost, $ 150,000 Time Frame Years 1-8
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1) Consider the follows Projects: If MARR- 17%. Recommend the best choice based upon ROR analysis: с -800 190 0 BOY D Initial Cost Annual income -2000 260 Salvage value Life 0 10 10 Known ROR 22% 18% 16.9% Need exact value of the incremental ROR on the last comparison. Others need its reasonable range for proper decision in the process. -500 140 0 10 24% B -1000 250 0 10
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