A firm is considering three mutually exclusive alternatives as part of a production improvement program . The alternatives are : Alternative A ( i = 12 % ) B ( i = 10 % ) C ( i = 15 % ) Installation Cost ( U ) 200,000 270,000 190,000 Uniform Annual 30,750 40,500 30,250 Benefit ( U ) Useful life in years 12 15 14 Which of the above should be chosen
A firm is considering three mutually exclusive alternatives as part of a production improvement program . The alternatives are : Alternative A ( i = 12 % ) B ( i = 10 % ) C ( i = 15 % ) Installation Cost ( U ) 200,000 270,000 190,000 Uniform Annual 30,750 40,500 30,250 Benefit ( U ) Useful life in years 12 15 14 Which of the above should be chosen
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 firm is considering three mutually exclusive alternatives as part of a production improvement program . The alternatives are : Alternative A ( i = 12 % ) B ( i = 10 % ) C ( i = 15 % ) Installation Cost ( U ) 200,000 270,000 190,000 Uniform Annual 30,750 40,500 30,250 Benefit ( U ) Useful life in years 12 15 14 Which of the above should be chosen
Transcribed Image Text:H.W
1- Find the internal rate using the method of Internal Rate of Return (IRR) if
i = 15%, for the table shown below. If the initial cost is (220,000 U)
Cost (U)
350 380 400
500
550 470
780
650
690
450
Revenue
0 0 500
660
1000 770
450
880
890
770
(U)
Year
1
2
3
4
5
6
7
8
10
3- The maintenance costs for a bridge with an expected 50 years life are
estimated to be ($10,000,000) each year for the first 5 years, followed by
($50,000,000) other costs at year 15, and ($75,000,000) at the year 30, if (i
= 10%), what is the annual uniform cost over the entire 50 years?
4- A firm is considering three mutually exclusive alternatives as part of a
production improvement program. The alternatives are:
Alternative
A (i=12%)
B (i=10%)
C (i=15%)
Installation Cost (U)
200,000
270,000
190,000
30,250
Uniform Annual
30,750
40,500
Benefit (U)
Useful life in years
12
14
15
Which of the above should be chosen?
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