3. Five mutually exclusive alternatives with 5-year lives are under consideration by the ABC Company. Using incremental IRR analysis, which should be chosen if the MARR is 12%? B D E A Cost $20,000 $18,000 $22,000 $15,000 $12,000 Annual 5558.0 5756.4 6563.6 3957.0 4012.8 benefits
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- Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?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?Problem 1. Multiple-Choice (8 2 OLf you invest $14,000 now into a projeet that will yield net evenue of $1,763 at the end of each year for 12 years, what is the IRK of your investment a) 15 b) 10% )9% d) 12 ej 7% D None of the above 02 it you invent $10,000 nuw into a project that will yield net tevenue of S1.560 the end of each year for 12 years, what is the ERR of your investment if your reinvestment rate is 9% per year a) 10% b) O d) 7% 06 012% None of the above 03. How much can you afford to pay for a 56,000 bond that pays 7% interest annually and will maturs 20 years hence if you desire to earn 10% on your investment? a)54,319 b) $2,979.8 ) $2.7435 d) $6,000 )53,227 ) None of the above Q4. A machine costs $40,000 and is expected to save $16,200 per year while in operation, If MARR - 20, what is the discounted payback period? a)6 years b) 5 years c) 4 yeap d) 3 years e) 7 years ) None of the above Q5. A piece of equipment is purchased for $20,000, will generate revenues of $4,000…
- Q2: Three mutually exclusive alternative public-works projects are currently under consideration. Their respective costs and benefits are included in the table below. Each of the projects has a useful life of 50 years, and MARR is 10% per year. Calculate which, if any, of these projects should be selected? Solve by hand. A В C Capital investment $8,500,000 $10,000,000 $12,000,000 Annual operating and 750,000 725,000 700,000 maintenance costs Market value 1,250,000 1,750,000 2,000,000 Annual benefit 2,150,000 2,265,000 2,500,000Consider the two mutually exclusive projects that follow. EOY 0 1 2 3 Project A -10000 5125 5125 5125 4450 Project B -8500 4450 4450 The firm's MARR is 10% per year Select the CORRECT statement: O a. The PW of project A is equal to that of project B O b. The PW of project A is smaller than that of project B O c. The IRR of project B is larger than that of project A O d. The IRR of project A is larger than that of project B2. Data for two alternatives are as follows: Alternatives A B Investment P35, 000 P50, 000 Annual benefits P20, 000 P25, 000 Annual O and M P6, 450 P13, 830 Estimated life, years 4 8. Net salvage value Р3, 500 Using an interest rate of 20%, which alternative should be chosen? Ans: Alternative A is referred over Alternative B
- Three mutually exclusive alternatives may replace the current equipment. Year A -$25,000 5,000 5,000 -$20,000 -$24,000 10,000 5,000 10,000 5,000 10,000 10,000 5,000 25,000 3. 8,000 5,000 (a) Construct a choice table for interest rates from 0% to 100%. (b) If the MARR is 12%, which alternative should be selected? 4110 4Evaluate these mutually exclusive alternatives with a horizon of 20 years and a MARR of 15% Use the conventional B/C ratio by PW analysis method. Note: (Do nothing) is not an option. A B Initial Investment $9,500 $18,500 Annual Savings $3,200 $5,000 Annual Costs Salvage Value $1,000 $2,750 $600 $4,200 Conventional B-C ratio with PW: B-C= = PW(benefits of the proposed project) PW(total costs of the proposed project) PW(B) I-PW(MV) + PW(O&M) A B C 1 A B 2 Initial Invest $9,500 $18,500 3 Ann. Savings $3,200 $5,000 4 Ann. Costs $1,000 $2,750 5 Salvage Val $6,000 $4,200 6 PW of Ben. $20,030 $31,297 7 PW of Costs $15,393 $35,457 a BIC 1.30 0.88Given the financial data in the table below for two mutually exclusive alternatives, determine the value "X" for the two alternatives to be equally attractive. Use an interest rate of 12% per year. Q Initial cost $2,500 $4,000 Annual benefit 400 Life
- Compute the payback statistic for Project A if the appropriate cost of capital is 8 percent and the maximum allowable payback period is four years. (Round your answer to 2 decimal places.) Project A Time: 4 5 Cash flow: $1,600 $590 $660 $640 $420 $220 Payback years Should the project be accepted or rejected? O accepted O rejected MacBook AirDetermine which of the following independent projects should be selected for investment if a maximum of $240,000 is available and the MARR is 10% per year. Use the PW method to evaluate mutually exclusive bundles to perform your analysis. Project Investment, $ NCF, $/Year Life, Years A −100,000 50,000 8 B −125,000 24,000 8 C −120,000 75,000 8 E −220,000 39,000 8 F −200,000 82,000 8Question No. r The following information is provided for five mutually exclusive alternatives that have 20-year useful lives. If the minimum attractive rate of return is 6%, which alternative should be selected using IROR Method? Alternatives B Cost 4,000 2,000 6,000 1,000 9,000 Uniform Annual Benefit 639 410 761 117 785 IROR 15% 20% 11% 10% 6% IROR (B-D) IROR (A-D) IROR (A-B) IROR (C-B) IROR (C-A) IROR (E-C) IROR (E-A) -5% 29% 18% 10% 9% 2% 14%