12.02-PR004 CustomMetalworks is considering the expansion of their cable fabrication business for towers, rigging, winches, and many other uses. They have available $250,000 for investment and have identified the following indivisible alternatives, each of which will provide an exit with full return of the investment at the end of a 5-year planning horizon. Each year, CustomMetalworks will receive an annual return as noted below. MARI is 12%. Investment Initial Investment Annual Return 1 2 3 4 5 $25,000 $40,000 $85,000 $100,000 $65,000 $7,500 $12,000 $20,000 $22,000 $17,000 For the original problem: a. Which alternatives should be selected by CustomMetalworks? b. What is the present worth for the optimum investment portfolio? c. What is the IRR for the optimum investment portfolio?
12.02-PR004 CustomMetalworks is considering the expansion of their cable fabrication business for towers, rigging, winches, and many other uses. They have available $250,000 for investment and have identified the following indivisible alternatives, each of which will provide an exit with full return of the investment at the end of a 5-year planning horizon. Each year, CustomMetalworks will receive an annual return as noted below. MARI is 12%. Investment Initial Investment Annual Return 1 2 3 4 5 $25,000 $40,000 $85,000 $100,000 $65,000 $7,500 $12,000 $20,000 $22,000 $17,000 For the original problem: a. Which alternatives should be selected by CustomMetalworks? b. What is the present worth for the optimum investment portfolio? c. What is the IRR for the optimum investment portfolio?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Parts G & H
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VIEWStep 2: g)(1) Determine optimum portfolio using the current limit on investment capital
VIEWStep 3: g)(2) Determine optimum portfolio using the current limit plus 20%
VIEWStep 4: g)(3) Determine optimum portfolio using the current limit minus 20%
VIEWStep 5: h)(1) Determine the optimal portfolio using current MARR
VIEWStep 6: h)(2) Determine the optimal portfolio using MARR=14.4%
VIEWStep 7: h)(3) Determine the optimal portfolio using MARR=9.6%
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