Gamma University is considering making one, or possibly none, of the four mutually exclusive investments below. Each alternative has a six-year life with the indicated residual values. The alternatives are mutually exclusive. Alternatives Data B Initial Cost $400,000 $100,000 $500,000 $200,000 Annual Costs $900 $12,000 $23,000 $9,000 Annual Benefits $101,800 $39,700 $148,200 $55,200 Residual Value 40,000 $10,000 $70,000 $20,000 Using incremental rate of return analysis (not Net Present Value or Equivalent Uniform Benefits/Costs), determine which project the university should undertake if its minimum acceptable ate of return, MARR, is 16%.

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
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Gamma University is considering making one, or possibly none, of the four mutually exclusive
investments below. Each alternative has a six-year life with the indicated residual values. The
alternatives are mutually exclusive.
Alternatives
Data
A
B
D
Initial Cost
$400,000
$100,000
$500,000
$200,000
Annual Costs
$900
$12,000
$23,000
$9,000
Annual Benefits
$101,800
$39,700
$10,000
$148,200
$55,200
Residual Value
40,000
$70,000
$20,000
Using incremental rate of return analysis (not Net Present Value or Equivalent Uniform
Benefits/Costs), determine which project the university should undertake if its minimum acceptable
rate of return, MARR, is 16%.
Transcribed Image Text:Gamma University is considering making one, or possibly none, of the four mutually exclusive investments below. Each alternative has a six-year life with the indicated residual values. The alternatives are mutually exclusive. Alternatives Data A B D Initial Cost $400,000 $100,000 $500,000 $200,000 Annual Costs $900 $12,000 $23,000 $9,000 Annual Benefits $101,800 $39,700 $10,000 $148,200 $55,200 Residual Value 40,000 $70,000 $20,000 Using incremental rate of return analysis (not Net Present Value or Equivalent Uniform Benefits/Costs), determine which project the university should undertake if its minimum acceptable rate of return, MARR, is 16%.
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