Evaluate these mutually exclusive alternatives with a horizon of 20 years and a MARR of 15% Use the conventional B/C ratio by PW analysis method. Note: (Do nothing) is not an option. A B Initial Investment $9,500 $18,500 Annual Savings $3,200 $5,000 Annual Costs Salvage Value $1,000 $2,750 $600 $4,200 Conventional B-C ratio with PW: B-C= = PW(benefits of the proposed project) PW(total costs of the proposed project) PW(B) I-PW(MV) + PW(O&M) A B C 1 A B 2 Initial Invest $9,500 $18,500 3 Ann. Savings $3,200 $5,000 4 Ann. Costs $1,000 $2,750 5 Salvage Val $6,000 $4,200 6 PW of Ben. $20,030 $31,297 7 PW of Costs $15,393 $35,457 a BIC 1.30 0.88

Evaluate these mutually exclusive alternatives with a horizon of 20 years and a MARR of 15% Use the conventional B/C ratio by PW analysis method. Note: (Do nothing) is not an option. A B Initial Investment $9,500 $18,500 Annual Savings $3,200 $5,000 Annual Costs Salvage Value $1,000 $2,750 $600 $4,200 Conventional B-C ratio with PW: B-C= = PW(benefits of the proposed project) PW(total costs of the proposed project) PW(B) I-PW(MV) + PW(O&M) A B C 1 A B 2 Initial Invest $9,500 $18,500 3 Ann. Savings $3,200 $5,000 4 Ann. Costs $1,000 $2,750 5 Salvage Val $6,000 $4,200 6 PW of Ben. $20,030 $31,297 7 PW of Costs $15,393 $35,457 a BIC 1.30 0.88

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

See similar textbooks

Similar questions

1. Data for two alternatives are given in the table below. Determine the X cost of alternative B so that the two alternatives will be equally desirable. Assume an interest of 11%. Use BCR analysis. ALTERNATIVE A Cost 9500 Salvage value 1000 1600 Annual benefit 2800 3700 Life (years) 12
Use Annual Cost Analysis to determine whether Alternative A or B should be chosen. The analysis period is 5 years. Assume an interest rate of 6% per year, compounded annually Alternative A Alternative B 1800 150 400 5 Initial Cost Annual Benefit Salvage Value Useful Life (yrs) 4230 340 2100 O Alternative B should be chosen, because its annual benefit is higher than Alternative A's Alternative A should be chosen, because its initial cost is lower than Alternative B's O Alternative B should be chosen, because its equivalent annual cost is $85.30 higher than Alternative A's Alternative A should be chosen, because its equivalent annual cost is $85.30 lower than Alternative B's
Abandonment Value Problem Required Return is IN 000's 10% NORMAL YEAR 0 CASH FLOW (8,800) ABANDONENT FLOW PROJECT NPV BY YEAR 8,800 1 6,000 + 3,100 = 9,100 NPV (10,-8800, 9, 1003, {1} N/A -527 2 2,875 + 3,900 = 4,775 3 1,000 + 0 = 1,000 If the project should be accepted, for how many years should the firm invest? A 1 B2 C3 D do not accept project
1 Given the following conditional value table, deter- mine the appropriate decision under uncertainty using: a) Maximax b) Maximin c) Equally likely PX VERY FAVORABLE ALTERNATIVES MARKET Build new plant $350,000 $240,000 STATES OF NATURE AVERAGE MARKET UNFAVORABLE MARKET -$300,000 Subcontract Overtime $180,000 $ 90,000 -$ 20,000 $110,000 $ 60,000 Do nothing $ 0 $ 0 $ -$ 10,000 0
The Larkspur Furniture Company needs a new grinder. Compute the present worth for these mutually exclusive alternatives and identify which you would recommend given i-10% per year. Larkspur uses a 10-year planning horizon. Alternati ve A B Initial Cost $4500 $5500 Annual Costs $300 $400 $0 5 years 10 years Salvage Value $500 Life a) PW costs of alternative A b) PW costs of alternative B c) Which one do you recommend? Explain why.
Consider the three small mutually exclusive investment alternatives in the table below. The feasible alternative chosen must provide service for a 10-year period. The MARR is 12% per year, and the market value of each is 0 at the end of useful life. State all assumptions (repeatablity/co-terminated at 5 year study period) you make in your analysis. Which alternative should be chosen? A B Capital Investment PhP 2,000 PhP 8,000 PhP 20,000 Use IRR (FW equation) analysis. Annual revenues less expenses 600 2,200 3,600 Useful life (years) 5 5 10 ANSWER: IRRA = 15.24% ; IRRB = 11.65% ; IRRC = Blank 3% ; Choose alternative Blank 4 %3D %3D Do not use comma and any unit of measure. Use two decimal places in the Final answer.
Compare the alternatives C and D on the basis of a present worth analysis using an interest rate of 10% per year and a study period of 10 years. Alternative C First Cost $-40,000 $-11,000 $-24,000 AOC, per Year Annual Increase in Operating Cost, per Year Salvage Value Life, Years $-2,000 $-200 $-500 $6,000 $200 10 The present worth of alternative C is $ and that of alternative D is $ (Click to select) voffers the lower present worth.
Can someone please solve this question using hand calculations only? PLEASE AND THANK YOU!!!
Compare alternatives A and B with the present worth method if the MARR is 14% per year. Which one would you recommend? Assume repeatability and a study period of 16 years. Capital Investment Operating Costs The PW of Alternative A is $ - 108236. (Round to the nearest dollar.) The PW of Alternative B is $ -95429. (Round to the nearest dollar.) Alternative B should be selected. A $55,000 $6,000 at end of year 1 and increasing by $600 per year thereafter $6,000 every 4 years 16 years $12,000 if just overhauled Overhaul Costs Life Salvage Value Click the icon to view the interest and annuity table for discrete compounding when the MARR is 14% per year. B $15,000 $12,000 at end of year 1 and increasing by $1,200 per year thereafter None 8 years negligible D
The cash flows for two mutually exclusive alternatives are as follow: A B - $500 - $600 -200 -300 500 150 400 300 300 450 Year 0 1 2 3 4 Each alternative has a 4-year useful life and no salvage value. The MARR is 12%. Which alternative should be selected based on: (a) Payback period (b) Benefit-cost ratio analysis (c) Rate of return analysis
1. Two mutually exclusive alternatives requiring different investments are being considered. The life of all two alternatives is estimated to be 20 years with no salvage value. The MARR that is considered is acceptable is 12%. The cash flows representing these two alternatives are as follows: Investment cost Net income per year Alternative A $100,000 $15,000 Alternative B $60,000 $11,000 Find the investment that should be selected using IRR on incremental investment (use PW formula).
Consider the mutually exclusive alternatives given in the table below. The MARR is 10% per year. Assuming repeatability, which alternative should thecompany select? (a) Alternative X (b) Alternative Y (c) Alternative Z (d) Do nothing.

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS