A firm is considering the development of several new products. The products under consideration are listed here; the products in each project group are mutually exclusive. Project group Products Development costs (P) Net annual cash flow (P) A A1 500,000 90,000 A2 650,000 110,000 A3 700,000 115,000 B B1 600,000 105,000 B2 675,000 112,000 C C1 800,000 150,000 C2 1,000,000 175,000 At most one product from each group will be selected. The firm has MARR of 10% per year and a capital investment budget limitation on development costs of P2,100,000. the life of all products is assumed to be ten (10) years. Assume no market values at the end of 10 years.
A firm is considering the development of several new products. The products under consideration are listed here; the products in each project group are mutually exclusive. Project group Products Development costs (P) Net annual cash flow (P) A A1 500,000 90,000 A2 650,000 110,000 A3 700,000 115,000 B B1 600,000 105,000 B2 675,000 112,000 C C1 800,000 150,000 C2 1,000,000 175,000 At most one product from each group will be selected. The firm has MARR of 10% per year and a capital investment budget limitation on development costs of P2,100,000. the life of all products is assumed to be ten (10) years. Assume no market values at the end of 10 years.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A firm is considering the development of several new products. The products under consideration are listed here; the products in each project group are mutually exclusive.
Project group Products Development costs (P) Net annual cash flow (P)
A A1 500,000 90,000
A2 650,000 110,000
A3 700,000 115,000
B B1 600,000 105,000
B2 675,000 112,000
C C1 800,000 150,000
C2 1,000,000 175,000
At most one product from each group will be selected. The firm has MARR of 10% per year and a capital investment budget limitation on development costs of P2,100,000. the life of all products is assumed to be ten (10) years. Assume no market values at the end of 10 years.
Transcribed Image Text:A firm is considering the development of several new products. The products under
consideration are listed here; the products in each project group are mutually exclusive.
Project group
Products
Development costs (P)
Net annual cash flow (P)
A1
500,000
90,000
A
A2
650,000
110,000
АЗ
700,000
115,000
B
B1
600,000
105,000
B2
675,000
112,000
C
Ci
800,000
150,000
C2
1,000,000
175,000
At most one product from each group will be selected. The firm has MARR of 10% per
year and a capital investment budget limitation on development costs of P2,100,000. the
life of all products is assumed to be ten (10) years. Assume no market values at the end
of 10 years.
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