Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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(b)
Calculate the profitability index of the two opportunities. (Round answers to 2 decimal
Profitability Index
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Save for Later
Which option should Charles choose?
Charles should choose
Option 1
eTextbook and Media
Save for Later
Option 2
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Transcribed Image Text:(b) Calculate the profitability index of the two opportunities. (Round answers to 2 decimal Profitability Index eTextbook and Media Save for Later Which option should Charles choose? Charles should choose Option 1 eTextbook and Media Save for Later Option 2
Charles Wilson is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Charles uses a
12% discount rate.
Equipment purchase and installation
Annual cash flow
Equipment overhaul in year 6
Equipment overhaul in year 8
Click here to view the factor table.
(a)
Net present value
Option 1
$70,700
$27,000
$
$4,820
Option 1
Option 2
Calculate the net present value of the two opportunities. (Round present value factor calculations to 4 decimal places, eg. 1.2514 and
the final answers to 0 decimal places, e.g. 59,991.)
$81,280
$29,330
$6.200
$
Option 2
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Transcribed Image Text:Charles Wilson is evaluating two new business opportunities. Each of the opportunities shown below has a 15-year life. Charles uses a 12% discount rate. Equipment purchase and installation Annual cash flow Equipment overhaul in year 6 Equipment overhaul in year 8 Click here to view the factor table. (a) Net present value Option 1 $70,700 $27,000 $ $4,820 Option 1 Option 2 Calculate the net present value of the two opportunities. (Round present value factor calculations to 4 decimal places, eg. 1.2514 and the final answers to 0 decimal places, e.g. 59,991.) $81,280 $29,330 $6.200 $ Option 2
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