a. Using net present worth analysis, calculate the rate of return for all four alternatives, and b. Using a MARR of 15%, determine which alternative the firm should select. Apply ROR analysis on incremental investment CF.
a. Using net present worth analysis, calculate the rate of return for all four alternatives, and b. Using a MARR of 15%, determine which alternative the firm should select. Apply ROR analysis on incremental investment CF.
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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1
Transcribed Image Text:2. Economic data pertaining to four mutually exclusive alternatives of a major
project are given in the following table.
IV
$11,200,000 $13,500,000
Capital Investment
$6,000,000
$9,500,000
Net Annual Revenue
550,000
965,000
1,165,000
1,395,000
Salvage Value
Useful Life (Years)
399,000
500,000
500,000
750,000
10
10
10
10
a. Using net present worth analysis, calculate the rate of return for all
four alternatives, and
b. Using a MARR of 15%, determine which alternative the firm should
select. Apply ROR analysis on incremental investment CF.
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