Three mutually exclusive projects, Project A, Project B, and Project C, are being considered for investment at a MARR of 10%.The three investments are explained in the table below. Answer the questions that follow the table.Project AProject BInitial Cost$50,000$40,000Project C$45,000Annual O&M$3,500$4,700$2,800Annual Revenues$5,300$7,400$8,200Useful life2 years3 years6 yearsWhat is the correct setup for calculating Annual Worth of Project A? How will you use this Annual Worth to calculate NPW forProject A?Use the different drop downs to complete the answers.AW:==[Select][Select]NPW AW [Select]=✓ ( [Select][Select],10%, [Select],10%, [Select]7 ) + (

The L.C.M of the three projects (2,3,6) is n = 6 years. We can repeat Project A for 3 cycles,…

Answered: Three mutually exclusive projects,…

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 3E

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# 3 QUESTION 10 Suppose the MARR is 5%. Use the following table to answer the question-Which option should be selected as the base alternative? Initial Investment Annual Revenue Useful Life (Years) E D $ 4 R CMS A. Neither option is acceptable as a base alternative. OB. Both options are acceptable base alternatives. OC. FMS OD. I'm completely lost! E. CMS F Click Save and Submit to save and submit. Click Save All Answers to save all answers. 888 74 $31,000 $38,000 6,866 % FMS 5 T 9,201 G 6 MacBook FO H & 7 F7 U +00 8 J 9 K Save All Answers P 7.
Q2. Consider the following two mutually exclusive projects: Cash Flow (A) -$350,000 25,000 Year 0 1 2 3 4 70,000 70,000 430,000 Cash Flow (B) -$35,000 17,000 11,000 17,500 11,600 Whichever project you choose, if any, you require a 15 percent return on your investment. a. If you apply the payback criterion, which investment will you choose? Why? b. If you apply the NPV criterion, which investment will you choose? Why? c. If you apply the IRR criterion, which investment will you choose? Why?
Q2) The two projects as part of oil industrial their cash flows in tables belwo: project B: r=8% cash flow (CF) project A:r=8% year cash flow (CF) -398 -242 1 120 105 2 175 105 280 115 Required: a) Find NPV for both project on base of r = 8%? b) Find the required IRR for both project and evaluate them based on this proceuder? Let the required IRR on range (10-20)%? c) Evaluate the mentioned project by using Pl during r=8%? %3D
(c) If A and B are mutually exclusive projects, which project would you select based on the rate of return on incremental investment at MARR = 10%? The rate of return on the incremental investment is %. (Round to one decimal place.) Which project would you select based on the rate of return on incremental investment at MARR = 10%? Choose the correct answer below. Project A O Project B 1: More Info FOT23 n 0 1 Net Cash Flow Project A - $145,000 35,000 35,000 140,000 Project B - $130,000 25,000 25,000 150,000
3. Mr. Decision is torn between two independent projects A and B. The data below each project are given and the MEAS under each project are also given. Take MARR = 12% for all projects. A. Perform the proper evaluation of all the projects available. B. Recommend the project(s) that can be selected from the list so you can help Mr. Decision to decide. C. Explain the method(s) of evaluation you used including the assumption(s) made. PARAMETERS MEA 1 МЕA 2 MEA 3 МEA 4 Investment Cost 1,500,000 1,000,000 2,000,000 2,500,000 Annual Service Benefit 200,000 200,000 150,000 115,000 Annual Insurance Benefit 300,000 150,000 200,000 Annual Maintenance and 120,000 100,000 500,000 200,000 Operational Costs Annual Revenues 90,000 100,000 110,000 90,000 Market Value 100,000 90,000 200,000 Useful Life, years 10 8 5 4 МEA 5 МEA 6 200,000 10,000 16,000 PARAMETERS MEA 7 МEA 8 Investment Cost Annual Service Benefit 100,000 10,000 30,000 300,000 15,000 500,000 11,000 10,000 Annual Insurance Benefit Annual…
A firm has a capital budget of $30,000 and is considering three possible independent projects. Project A has a present outlay of $12,000 and yields $4,231 per annum for 5 years. Project B has a present outlay of $10,000 and yields $4,184 per annum for 5 years. Project C has a present outlay of $17,000 and yields $5,802 per annum for 10 years. Funds which are not allocated to one of the projects can be placed in a bank deposit. Identify seven combinations of project investments and a bank deposits which exhaust the budget. Which of the above combinations should the firm choose when the bank deposit rate is (i) 15% or (ii) 20%? Explain your answer and show your work. Suppose there is no option to deposit in the bank, but the projects are "divisible" (e.g. you may have 25% of project A). Which combination should the firm choose? Explain your answer and show your work. Use 15% as the deposit rate (discount rate).
Which of the five project net cashflows presented in the table below would be considered a Conventional cashflow? Note: This is a Multiple Answer question. Please select all of the following options you think are correct? Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Project 1 -50,000 30,000 15,000 5,000 3,000 7,000 13,000 Project 2 -50,000 -10,000 50,000 70,000 3,000 -2,000 -5,000 Project 3 -100,000 -20,000 50,000 80,000 120,000 Project 4 -70,000 -30,000 20,000 70,000 -10,000 5,000 20,000 Project 5 -80,000 -40,000 -35,000 23,000 47,000 43,000 19,000 O Project 4 O Project 2 O Project 5 Project 1 Project 3
The data below are estimated for a project study. i = 10% Plan A Initial Investment P 35,000 Annual Operating Cost P 6,450 Life 4 years Salvage Value none Annual Revenue 19,000 Plan B Initial Investment P 50,000 Annual Revenue P 25,000 Annual Disbursement P 13830
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Quilts R Us (QRU) is considering an investment in a new patterning attachment with the cash flow profile shown in the table below. QRU’s MARR is 13.5%/yr. Solve, a. What is the external rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on external rate of return? c. Should QRU invest?
1. A capital budgeting project is acceptable if the rate of return required for such a project is greater than the project's internal rate of return. True False
3 Question 16 It makes no difference in the final answer if a rate of return equation is expressed in terms of P, A, or F. True or False Question 24 In the case of independent projects, only those projects for which the net present value is greater than or equal to 0 are retained. Options for question 24: True or False

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