2. You are considering two mutually exclusive financial opportunities. Project A requires an initial outlay of$100,000, offers $15,000 a year for twelve years, and has an expected residual value of $100,000 at theend year twelve. On the other hand, Project B has an initial cost of $150,000, offers $18,750 annuallyfor twelve years, and has an expected residual value of $150,000 at the end of year twelve.a. Determine the range of MARR's (minimum acceptable rate of return) for which Project A is thebetter choice;b. Determine the range of MARR's for which Project B is the better choice; andc. Determine the range of MARR's for which neither of these is an acceptable option.

PROJECT A Initial Outlay : 100,000 Returns /year : 15,000 Residual : 100,000 PROJECT B Initial…

Answered: 2. You are considering two mutually…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Consider two mutually exclusive investment projects: A 1 and A2. Each project has the same service life, and the present worth of each component value (B, I, and C') is computed at 10% as follows: Project Al: B=$8000, I-$3500, C-$2000 and Project A2: B=$18000, I- $11,000, C'-$4000 Which project would be the best alternative based on PI index?
Capital budgeting is related to __.choose correct option and explain and also explain incorrect options and also explain summary A•long terms assets B•short term assets C•long terms and short terms assets D•fixed assets
8. Consider the two mutually exclusive investment projects given in the table below for which MARR 15% On the basis of the IRR crterion, which project would be selected under an infinite planning horizon with project repeatability likely? Click the icon to view the cash flows for the investment projects The rate of retum on the incremental investment is 6. (Round to one decimal place.) Which project would be selected on the basis of the IRR criterion? Choose the correct anower below. O Project A O Project B 6: More Info Net Cash Flow Project A Project B -$5.000 $10,000 3,000 8,000 2. 4,000 8.000 3. 4,000 IRR 49 39% 37.00%
Consider the investment projects listed in the table below, all of which have a four year investment life. 1 2 W|N 3 4 N A -$3,200 0 0 0 $6,300 B -$3,600 1,600 2,800 3,,500 2200 a) What is the simple payback period of each project? C -$2,600 -1,700 -900 4,500 4,500 D -$2,400 -1,100 1,800 2,500 1,500
Payback Period and Net Present Value If a project with conventional cash flows has a payback period less than the project’s life, can you definitively state the algebraic sign of the NPV? Why or why not? If you know that the discounted payback period is less than the project’s life, what can you say about the NPV? Explain. Q
Q2. Consider the cash flow given in the following table. What is the value of the missing cash flows, X, if the project's IRR is 10%? Year Net Cash Flow -$3,000 1 2 X 3 $1,000
. Consider the following two mutually exclusive investment projects: Project A Project B -$15,000 -$25,000 $5,000 $14,500 $8,000 $9,000 $5,000 $10,000 $6,000 In 10 1 12 3 Using the least common multiple analysis period, determine the present worth of project A. Assume that i=12% 3. Using the least common multiple analysis period, determine the present worth of project B. . For questions 12 and 13, which project would you select?
Question(4): A power plant is being considered in the dead sea location. For an initial investment of $130 million, annual net revenues are estimated to be $15 million in years 1-5 and $20 million in years 6-20. Assume no residual market value for the plant. a. What is the simple payback period for the plant?
2.4. Company C is planning to undertake a project requiring initial investment of P105 million. The project is expected to generate P25 million per year in net cash flows for 7 years. Calculate the payback period of the project.
. Consider the following two mutually exclusive projects: Project A Project B -$15,000 -$25,000 $5,000 $12,000 $8,000 n 10 1 2 3 PW (15%) ? $9,600 The firm's MARR is known to be 15%. Compute the PW (15%) for Project A. $0 $X $X 0. In question 9, compute the unknown cash flow X in years 2 and 3 for Project B. 1. In question 9, which project would you select?
Calculating the IRR for Project Long Project Long is expected to provide five years of cash inflows and to require an initial investment of $100,000. The required rate of return or discount rate that is appropriate for valuing the cash flows of Project Long is 17 percent. What is Project Long's IRR, and is it a good investment opportunity?
3. Sanders Corp. is considering three mutually exclusive alternatives for one of their production facilities. The cash flow details, which indicate the expected revenues for each possible capital investment (option) are shown in thousands of dollars in the table provided. Year 0 1 2 3 4 5 $ 6 GAGA $ $ $ $ LA CA $ Option #1 $ (8.00) $ GAGA 2.60 $ 2.60 $ 2.60 $ 2.60 $ 2.60 $ 2.60 $ Option #2 Option #3 Assuming a MARR rate of 12.0% per year and based on a rate of return analysis which (if any) of these alternatives should be implemented? What is the discounted payback period and annual worth of the preferred alternative (if any was selected). (13.90) $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ 4.05 $ (24.00) 3.00 6.00 9.00 12.00 15.00

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