3) Consider the two mutually exclusive projects in table below: Project's Cash Flow n B1 B2 Cash Flow Salvage Value Cash Flow Salvage Value 0 -$20,000 -$17,000 1 -2,000 10,000 -2,500 9,000 2 -2,000 8,000 -2,500 6,000 3 -2,000 5,000 -2,500 3,000 4 -2,000 3,000 5 -2,000 2,000 Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%? b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?
3) Consider the two mutually exclusive projects in table below: Project's Cash Flow n B1 B2 Cash Flow Salvage Value Cash Flow Salvage Value 0 -$20,000 -$17,000 1 -2,000 10,000 -2,500 9,000 2 -2,000 8,000 -2,500 6,000 3 -2,000 5,000 -2,500 3,000 4 -2,000 3,000 5 -2,000 2,000 Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%? b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Don't use Ai
Transcribed Image Text:3)
Consider the two mutually exclusive projects in table below:
Project's Cash Flow
n
B1
B2
Cash Flow
Salvage Value
Cash Flow
Salvage Value
0
-$20,000
-$17,000
1
-2,000
10,000
-2,500
9,000
2
-2,000
8,000
-2,500
6,000
3
-2,000
5,000
-2,500
3,000
4
-2,000
3,000
5
-2,000
2,000
Salvage values represent the net proceeds (after tax) from disposal of the assets if they
are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated)
with the same costs and salvage values for an indefinite period.
a) Assuming an infinite planning horizon, which project is a better choice at MARR = 12%?
b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education