5.7. Projects A through E are being considered by an investor. They all are ten-year projects and the MARR is 10%. Projects A and B are mutually exclusive. Projects C and D are mutually exclusive and contingent on the acceptance of B. Project E is contingent on the acceptance of A. Project NPV ERR Capital investment $20,000 $15,000 $30,000 $22,000 $15,000 $5,000 8% $20,000 $15,000 $10,000 D E (a) List all of the possible mutually exclusive alternatives. (b) Which alternative is the best economic choice with unlimited capital? (c) Which alternative is the best economic choice with a capital constraint of $40,000?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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5.7. Projects A through E are being considered by an investor. They all are ten-year projects and
the MARR is 10%. Projects A and B are mutually exclusive. Projects C and D are mutually
exclusive and contingent on the acceptance of B. Project E is contingent on the acceptance
of A.
Project NPV ERR
Capital investment
$5,000
$20,000
$15,000
$30,000
B
8%
$20,000
$15,000
$10,000
$22,000
$15,000
D
E
(a) List all of the possible mutually exclusive alternatives.
(b) Which alternative is the best economic choice with unlimited capital?
(c) Which alternative is the best economic choice with a capital constraint of $40,000?
Transcribed Image Text:5.7. Projects A through E are being considered by an investor. They all are ten-year projects and the MARR is 10%. Projects A and B are mutually exclusive. Projects C and D are mutually exclusive and contingent on the acceptance of B. Project E is contingent on the acceptance of A. Project NPV ERR Capital investment $5,000 $20,000 $15,000 $30,000 B 8% $20,000 $15,000 $10,000 $22,000 $15,000 D E (a) List all of the possible mutually exclusive alternatives. (b) Which alternative is the best economic choice with unlimited capital? (c) Which alternative is the best economic choice with a capital constraint of $40,000?
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