Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative aregiven below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to selectnone of them. Make a recommendation based on the following methods.Design YInvestment costAnnual revenueAnnual costUseful lifeSalvage valueNet PWa. Based on PW method, Designb. The modified B/C ratio of Design Y isThe modified B/C ration of Design Z isis more economical.$140,000$43,705$7,881d. The discounted payback period of Design Y isThe discounted payback period of Design Z isDesign Zc. The incremental B/C ratio is (Round to two decimal places)Therefore, based on the B/C ratio method, Design$275,000$86,582$27,68315 years15 years$14,700$33,000$135,999 $180,890(Round to two decimal places)(Round to two decimal places)is more economicalyears (Round to one decimal place)years (Round to one decimal place)Therefore, based on the payback period method, Design would be preferred.(e) Why could the recommendations based on the payback period method be different from the other two methods?A. because the payback period method ignores the cash flows after the payback periodB. because the payback period gives more weight to the cash flows after the payback period

Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y Investment cost Annual revenue Annual cost Useful life Salvage value Net PW is more economical. a. Based on PW method, Design b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is $140,000 $43,705 $7,881 15 years $14,700 $135,999 Design Z $275,000 $86,582 $27,683 15 years $33,000 $180,890 (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design is more economical

Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 10% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y Investment cost Annual revenue Annual cost Useful life Salvage value Net PW is more economical. a. Based on PW method, Design b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is $140,000 $43,705 $7,881 15 years $14,700 $135,999 Design Z $275,000 $86,582 $27,683 15 years $33,000 $180,890 (Round to two decimal places) (Round to two decimal places) c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design is more economical

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

See similar textbooks

Similar questions

Alternative Annualized first cost. $/year Annual M&O cost. $/year Annual benefits, $/year Annual disbenefits, $/year Life, years Multiple Choice O O fund both X and Y fund neither fund Y fund X 60,000 90.000 45,000 35,000 110.000 150.000 20,000 45,000 Show Transcribed Text for the two independent projects shown determine which if any should be funded i=10% per year using B/C ratio method.
Select the best alternative through internal rate of return analysis. Assume that the minimum attractive rate of return is 10% per year. Machine X |Machine YInitial cost $ 400,000.00 $ 500,000.00Annual operating cost $ 15,000.00 |$ 25,000.00 Annual profit $ 20,000.00 |$ 40,000.00Residual value $ 85,000.00 |$ 100,000.00Project life 15 years | none Engineering Economic Analysis
Alternative Overall Incremental Rate Of Return in % When Initial Alternative Investment,$ Rate of Return, % Compared with Alternative A В A - 40,000 29 B - 75,000 15 1 -100,000 16 7 20 D -200,000 14 10 13 12 If the alternatives are independent, which should be selected if the company's MARR is 15% per year? (Include: procedure and explain) O Only alternative A O Alternatives A and B O Alternatives A and C Alternatives A, B, and C O O
For the mutually exclusive alternatives shown, the one(s) that should be selected are: (a) Only C (b) Only A Alternative PW, $ A - 25,000 (c) C and D B -12,000 (d) Only D 10,000 (e) Any of the above D 15,000 a b d
PROBLEM #7: Three alternatives to incorporate improved techniques to manufacture Vertical Axis Wind Turbine have been developed and costed. Compare the alternatives below using capitalized cost and an interest rate of 12% per 4,55 and determine the best alternative among the following: First Alternative Second Alternative Third Alternative First Cost Php. 2,000.000 Php 3,000,000 Php 10,000,000 Net income per quarter Php. 300.000 Php 100,000 Php 400,000 Salvage value Php. 50.000 Php 70,000 N/A Life years 4 8 00
Given the financial data for four mutually exclusive alternatives in the table below, A C $15,000 $36,000 $21,200 45,000 First cost O &M Cost/ year 1,600 400 900 1,000 Benefit/year Salvage value Life in years 8,000 13,000 9,000 15,000 3,000 6,000 4,600 10,000 4 a) determine the best alternative using the incremental rate of return (AROR) analysis. MARR =10%. b) The most attractive alternative for a MARR of 8% is c) The most attractive alternative for a MARR of 11 % is d) The most attractive alternative for a MARR over 11.7% is
Determine the process to compare alternatives on an equal basis and select the alternative that is wisest from an economic standpoint?
some compliance issues identified by the auditor-general of south africa and national treasury are related to the budget process for several municipalities in the north west province. as part of the term of rference, oracle Pty is required to attend to this issue. provide a critical discussiin the budget process including timelines for municipalities in south africa
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 15% per year and a study period of 10 years. Alternative Alternative D You received partial credit in the previous attempt. с $-50,000 $-8,000 $-1,500 $14,000 10 D $-21,000 $-9,000 $-200 $1,500 5 First Cost AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years The present worth of alternative C is $-112158.8 and that of alternative D is $-78889.C offers the lower present worth.
Given the following pertinent data for four alternatives, what is the best alternative using the incremental ROR method given MARR=10% Initial Cost Annual CF, $ Life, years 30 O Alt. A Alt. B O Alt. C A O Alt. D B +22,000 +35,000 с -200,000 -275,000 -190,000 -331,350 30 D +19500 +42,000 30 30
For mutually exclusive projects are being considered for a 2 mile jog in track. The life of the track is expected to be 75 years and the sponsoring agency MARR is 13% per year annual benefits to the public. I've been estimated by an advisory committee and are shown below used to be – C method incrementally to select the best jogging track.
The estimated negative cash flows for three design alternatives are shown below. The MARR is 10% per year and the study period is four years. Which alternative is best based on the IRR method? Doing nothing is not an option. Capital investment Annual expenses OA. Alternative B OB. Alternative C OC. Alternative A EOY 0 1-4 A $85,700 8,500 Alternative B $64,500 Which alternative would you choose as a base one? Choose the correct answer below. 15,150 C $71,900 12,450