For Nos. 48-50. A special purpose machine is to be acquired by paying a P15.000 initial cash payment plus a debt assumption of P135.000. The machine will generate additional net annual cash inflow of P40,000 for the firm throughout the 10 years of useful life of the asset. At the end of its life, a salvage value of 10% of its initial cost will be realized. Assuming that the MARR is 20% per annum, 48. Is the project justified using the IRR method? A. IRR = 0.1572: Since IRR MARR, project is not justified. B. IRR = 0.1984; Since IRR < MARR, project is not justified. C. IRR = 0.2379: Since IRR > MARR, project is justified. D. IRR = 0.2762: Since IRR > MARR, project is justified. 49. Is the project justified using the ERRR method? A. ERRR = 0.2653: Since ERRR > MARR, project is justified. B. ERRR = 0.2320; Since ERRR > MARR, project is justified. C. ERRR-0.1987: Since ERRR < MARR, project is not justified. D. ERRR = 0.1653: Since ERRR < MARR, project is not justified. 50. Is the project justified using the ERR method? A. ERR = 0.1813: Since ERR < MARR, project is not justified. B. ERR = 0.1974; Since ERR MARR, project is not justified. C. ERR = 0.2152: Since ERR > MARR, project is justified. D. ERR = 0.2278; Since ERR > MARR, project is justified.
For Nos. 48-50. A special purpose machine is to be acquired by paying a P15.000 initial cash payment plus a debt assumption of P135.000. The machine will generate additional net annual cash inflow of P40,000 for the firm throughout the 10 years of useful life of the asset. At the end of its life, a salvage value of 10% of its initial cost will be realized. Assuming that the MARR is 20% per annum, 48. Is the project justified using the IRR method? A. IRR = 0.1572: Since IRR MARR, project is not justified. B. IRR = 0.1984; Since IRR < MARR, project is not justified. C. IRR = 0.2379: Since IRR > MARR, project is justified. D. IRR = 0.2762: Since IRR > MARR, project is justified. 49. Is the project justified using the ERRR method? A. ERRR = 0.2653: Since ERRR > MARR, project is justified. B. ERRR = 0.2320; Since ERRR > MARR, project is justified. C. ERRR-0.1987: Since ERRR < MARR, project is not justified. D. ERRR = 0.1653: Since ERRR < MARR, project is not justified. 50. Is the project justified using the ERR method? A. ERR = 0.1813: Since ERR < MARR, project is not justified. B. ERR = 0.1974; Since ERR MARR, project is not justified. C. ERR = 0.2152: Since ERR > MARR, project is justified. D. ERR = 0.2278; Since ERR > MARR, project is justified.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:For Nos. 48-50. A special purpose machine is to be acquired by paying a P15,000 initial cash payment plus a debt assumption of P135,000. The machine will generate additional net annual cash inflow of P40,000 for the firm
throughout the 10 years of useful life of the asset. At the end of its life, a salvage value of 10% of its initial cost will be realized. Assuming that the MARR is 20% per annum,
48. Is the project justified using the IRR method?
A. IRR = 0.1572: Since IRR
B. IRR = 0.1984; Since IRR
MARR, project is not justified.
MARR, project is not justified.
C. IRR = 0.2379: Since IRR > MARR, project is justified.
D. IRR = 0.2762; Since IRR > MARR, project is justified.
49. Is the project justified using the ERRR method?
A. ERRR = 0.2653; Since ERRR > MARR, project is justified.
B. ERRR = 0.2320; Since ERRR > MARR, project is justified.
C. ERRR = 0.1987; Since ERRR MARR, project is not justified.
D. ERRR = 0.1653; Since ERRR < MARR, project is not justified.
50. Is the project justified using the ERR method?
A. ERR = 0.1813; Since ERR
B. ERR = 0.1974; Since ERR
MARR, project is not justified.
MARR, project is not justified.
C. ERR = 0.2152; Since ERR > MARR, project is justified.
D. ERR = 0.2278; Since ERR > MARR, project is justified.
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