Two mutually exclusive alternatives are being considered. Both have lives of ten years.Alternative A has a first cost of $10,000 and an annual benefit of $4500.Alternative B costs $15,000 and has annual benefits of $8800.7-65If the MARR is 6%, which alternative should be selected? Solve the problem by:(a) Present worth analysis(b) Annual cash flow analysis(c) Rate of return analysis

Present worth can be calculated by using this equation Present worth(PW) = -first cost+A1-1(1+i)ni…

Answered: 7-65 Two mutually exclusive…

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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A $1,000 investment in project that returns $100/year for 5 years is to be compared with a $700 investment in a project that returns $90/year for 4 years. What would be a good metric(s) for comparing these projects? A. Equivalent uniform annual cash flow, only. B. Internal rate of return (only correct choice of these options) C. Internal rate of return and equivalent uniform annual cash flow D. Benefit to cost ratio and internal rate of return E. Benefit to cost ratio (only correct choice of these options) Give answer fast and only type answer
An investment that costs $22,500 will produce annual cash flows of $4,500 for a period of 6 years. Further, the investment has an expected salvage value of $2,750. Given a desired rate of return of 9%, what will the investment generate? (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Do not round your intermediate calculations. Round your answer to the nearest whole dollar.
Net Present Value Method, Present Value Index, and Analysis for a service company Continental Railroad Company is evaluating three capital investment proposals by using the net present value method. Relevant data related to the proposals are summarized as follows: Ramp Computer Facilities Network $423,052 Amount to be invested Annual net cash flows: Year 1 Year 2 Year 3 Year 1 2 3 4 5 6 7 8 9 10 6% Present Value of $1 at Compound Interest 0.943 0.890 0.840 0.792 0.747 0.705 0.665 0.627 0.592 0.558 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 Maintenance Equipment $677,579 0.424 0.386 12% 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 305,000 284,000 259,000 0.361 0.322 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 220,000 198,000 176,000 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 $188,789 125,000 86,000 63,000
Alternative Uno has a first cost of $10,000 and annual expenses of $3000, whereas Alternative Dos has a first cost of $35,000, annual expenses of $2000, and a recurring cost of $5000 every 10 years. If both alternatives have an infinite life, which of the following equations can be used to solve for the rate of return on the incremental investment? (a) 0 = −$25, 000 + $1000/i − $5000(A/F, i, 10) (b) 0 = −$25, 000 + $1000/i + $5000(A/P, i, 10)/i (c) 0 = −$25, 000 + $1000/i − $5000(A/F, i, 10)/i (d) 0 = +$25, 000 − $1000/i + $5000(A/F, i, 10)?
A project that provides annual cash flows of $16,900 for eight years costs $75,000 today. What is the NPV for the project if the required return is 7 percent? What is the NPV for the project if the required return is 19 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
A new project will have an intial cost of $75,000. Cash flows from the project are expected to be $45,000, $25,000, and $20,000 over the next 3 years, respectively. Assuming a discount rate of 8%, what is the project's PI? Question 7 options: 0.98 1.10 1.05 0.95 1.01
A project that provides annual cash flows of $16,900 for eight years costs $75,000 today. What is the NPV for the project if the required return is 7 percent? What is the NPV for the project if the required return is 19 percent? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) At what discount rate would you be indifferent between accepting the project and rejecting it? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
A project has the following cash flows. It costs $15,000. It briongs in $22,000 after one year, and costs an adittional $6,500 after two years. The Required rate of return is 11%. Calculate the MIRR using the combination approach.
A small company wants to invest in Project A or B. The cash flows for both are shown below. Determine the payback period for each project assuming a MARR of 5% and suggest which project should be selected based on discounted payback period analysis.
What is the profitability index of a project that costs $10,000 and provides cash flows of $3,200 in years 1 and 2 and $5,200 in years 3 and 4? The discount rate is 8%. Note: Do not round intermediate calculations. Round your answer to 4 decimal places. Please answer fast I give upvote.
Target Corporation (TGT) is considering a new delivery system that costs $194,875. Assume a required rate of return of 4.26% and the following cash flow schedule: Year 1: $46,608 .Year 2: $70,559 Year 3: $95,705 Year 4: $11,450 The project's discounted payback period (DPP) is closest to O A. 2.08 years. OB. 2.19 years. OC. 2.31 years. COD. 2.44 years.
A project that costs $2,300 to install will provide annual cash flows of $730 for each of the next 5 years. a. Calculate the NPV if the opportunity cost of capital is 12%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) NPV b. Is this project worth pursuing? Yes O No c. What is the project's internal rate of return IRR? (Do not round intermediate calculations. Round your answer to 2 decimal places.) %24

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