Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:Two mutually exclusive alternatives have the estimates shown below. Use annual worth analysis to determine which should be
selected at an interest rate of 15% per year.
Q
R
$-44,000
$-11,000
$3,000
$-84,000
$-6,000 in year 1, increasing by $1,000 per year thereafter
$10,000
First Cost
AOC per Year
Salvage Value
Life
2 years
4 years
Alternative (Click to select) vshould be selected.
(Click to select)
Q
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- Consider the three small mutually exclusive investment alternatives in the table below. The feasible alternative chosen must provide service for a 10-year period. The MARR is 12% per year, and the market value of each is 0 at the end of useful life. State all assumptions (repeatablity/co-terminated at 5 year study period) you make in your analysis. Which alternative should be chosen? A B Capital Investment PhP 2,000 PhP 8,000 PhP 20,000 Use IRR (FW equation) analysis. Annual revenues less expenses 600 2,200 3,600 Useful life (years) 5 5 10 ANSWER: IRRA = 15.24% ; IRRB = 11.65% ; IRRC = Blank 3% ; Choose alternative Blank 4 %3D %3D Do not use comma and any unit of measure. Use two decimal places in the Final answer.arrow_forwardCompare the alternatives C and D on the basis of a present worth analysis using an interest rate of 10% per year and a study period of 10 years. Alternative C First Cost $-40,000 $-11,000 $-24,000 AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years $-2,000 $-200 $-500 $6,000 $200 10 The present worth of alternative C is $ and that of alternative D is $ (Click to select) voffers the lower present worth.arrow_forwardCan someone please solve this question using hand calculations only? PLEASE AND THANK YOU!!!arrow_forward
- The equivalent annual worth of alternative A over an infinite time period is closest to:a. $-25,000b. $-27,200c. $-31,600d. $-37,100arrow_forwardCompare three alternatives on the basis of their capitalized costs at /= 8% per year and select the best alternative. Alternative E F G $-460,000 $-30,000 $90,000 4 First Cost AOC, per Year Salvage Value Life, Years $-80,000 $-65,000 $40,000 2 The capitalized cost of alternative E is $ The best alternative is (Click to select) ▼ alternative F is $ $-960,000 $-3,000 $450,000 ∞0 and alternative G is $arrow_forwardWith the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 8% per year. Determine the replacement value. Machine X Machine Y 90,000 Market Value, S -40,000 for year 1,increasing by 2000 per year thereafter. 24,000 Annual Cost, $ per Year -59,500 Salvage Value Life, Years 19,500 The replacement value is $arrow_forward
- Two investment opportunities are as follows: A B First cost $150 $115 Uniform annual benefit $26 $20 End-of-useful-life salvage value $O SO Useful life, in years 10 10 If the MARR is 13%, which alternative should be selected?arrow_forwardConsider the following alternatives below.Based on a 7% interest rate, assuming both alternatives perform the same task and there is a continuing requirement, which alternative should be selected and what is its equivalent uniform annual cost?arrow_forwardThe cash flows for two mutually exclusive alternatives are as follow: A B - $500 - $600 -200 -300 500 150 400 300 300 450 Year 0 1 2 3 4 Each alternative has a 4-year useful life and no salvage value. The MARR is 12%. Which alternative should be selected based on: (a) Payback period (b) Benefit-cost ratio analysis (c) Rate of return analysisarrow_forward
- 1. Two mutually exclusive alternatives requiring different investments are being considered. The life of all two alternatives is estimated to be 20 years with no salvage value. The MARR that is considered is acceptable is 12%. The cash flows representing these two alternatives are as follows: Investment cost Net income per year Alternative A $100,000 $15,000 Alternative B $60,000 $11,000 Find the investment that should be selected using IRR on incremental investment (use PW formula).arrow_forwardSolve all this question......you will not solve all questions then I will give you down?? upvote...arrow_forward
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