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
I need the answer as soon as possible
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.
PLEASE SHOW COMPLETE SOLUTION, NO EXCEL.
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
Use PRESENT WORTH. Show complete solution and cash flow diagram.
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 company is considering two projects. The discount rate is 10 percent, and the projects' cash flows would be: Years 1 3 Project A -$700 $500 $300 $100 Project B -$700 $100 $300 | $600 a. Calculate the projects' NPVS and IRRS. b. If the two projects are independent, which project(s) should be chosen? c. If the two projects are mutually exclusive, which project should be chosen?
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.

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