Consider the following two mutually exclusive investment projects: 11 0 1 2 3 4 5 A Salvage Value Cash Flow -$12,000 -$2,000 $6,000 -$2,000 $4,000 -$2,000 $3,000 -$2,000 $2,000 -$2,000 $2,000 Cash Flow -$10,000 -$2,100 -$2,100 -$2,100 B Salvage Value $6,000 $3,000 $1,000 Salvage values represent the net proceeds (after tax) from the disposal of assets if they are sold at the end of the year listed. Both projects will be available (and can be repeated) with the same costs and salvage values for an indefinite period. (a) With an infinite planning horizon, which project is a better choice at MARR = 12%? (b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?

Consider the following two mutually exclusive investment projects: 11 0 1 2 3 4 5 A Salvage Value Cash Flow -$12,000 -$2,000 $6,000 -$2,000 $4,000 -$2,000 $3,000 -$2,000 $2,000 -$2,000 $2,000 Cash Flow -$10,000 -$2,100 -$2,100 -$2,100 B Salvage Value $6,000 $3,000 $1,000 Salvage values represent the net proceeds (after tax) from the disposal of assets if they are sold at the end of the year listed. Both projects will be available (and can be repeated) with the same costs and salvage values for an indefinite period. (a) With an infinite planning horizon, which project is a better choice at MARR = 12%? (b) With a 10-year planning horizon, which project is a better choice at MARR = 12%?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 2E

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