4.) A man owns a corner plot. He must decide which of the several alternatives to select in trying to obtain a desirable return on his investment. After much study and calculation, he decides that the two best alternatives are as given in the following table: Build Build soft ice-cream stand 36,00,000 1,50,000 9,80,000 20 gas station 20,00,000 Firet cost (Re.) Annual property taxes (Rs.) Annual income (Rs.) Life of building (years) Salvage value (Rs.) 80,000 8,00,000 20 Evaluate the alternatives based on the future worth method at i = 12%.
4.) A man owns a corner plot. He must decide which of the several alternatives to select in trying to obtain a desirable return on his investment. After much study and calculation, he decides that the two best alternatives are as given in the following table: Build Build soft ice-cream stand 36,00,000 1,50,000 9,80,000 20 gas station 20,00,000 Firet cost (Re.) Annual property taxes (Rs.) Annual income (Rs.) Life of building (years) Salvage value (Rs.) 80,000 8,00,000 20 Evaluate the alternatives based on the future worth method at i = 12%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:4.) A man owns a corner plot. He must decide which of the several alternatives to select in trying
to obtain a desirable return on his investment. After much study and calculation, he decides that
the two best alternatives are as given in the following table:
Build
Build soft
gas station
ice-cream stand
Firet coet (Re.)
Annual property taxes (Rs.)
Annual income (Rs.)
Life of building (years)
Salvage value (Rs.)
20,00,000
36,00,000
80,000
1,50,000
8,00,000
9,80,000
20
20
Evaluate the alternatives based on the future worth method at i = 12%.
Transcribed Image Text:4. Alternative 1-Build gas station
Alternative 2-Build soft ice-cream stand
FW = Rs. 3,25,85,440
FW = Rs. 2,50,77,560
The future worth of alternative 1 is greater than that of alternative 2. Thus, building the gas station
is the best alternative.
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