5.42 Consider the following two investment alternatives: Project's Cash Flow Al A2 -$15,000 -$25,000 1 9,500 2 12,500 7,500 PW(15%) ? 9,300 The firm's MARR is known to be 15%. (a) Compute PW(15%) for A1. (b) Compute the unknown cash flow X in years 2 and 3 for A2. (c) Compute the project balance (at 15%) of A1 at the end of period 3. (d) If these two projects are mutually exclusive alternatives, which one would you select?
5.42 Consider the following two investment alternatives: Project's Cash Flow Al A2 -$15,000 -$25,000 1 9,500 2 12,500 7,500 PW(15%) ? 9,300 The firm's MARR is known to be 15%. (a) Compute PW(15%) for A1. (b) Compute the unknown cash flow X in years 2 and 3 for A2. (c) Compute the project balance (at 15%) of A1 at the end of period 3. (d) If these two projects are mutually exclusive alternatives, which one would you select?
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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q5.42
Transcribed Image Text:5.42 Consider the following two investment alternatives:
Project's Cash Flow
A1
A2
-$15,000
-$25,000
1
9,500
2
12,500
X
3
7,500
X
PW(15%)
?
9,300
The firm's MARR is known to be 15%.
(a) Compute PW(15%) for A1.
(b) Compute the unknown cash flow X in years 2 and 3 for A2.
(c) Compute the project balance (at 15%) of Al at the end of period 3.
(d) If these two projects are mutually exclusive alternatives, which one would you
select?
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