1) Given the financial data for four mutually exclusive alternatives in the table below, determine the best alternative using the incremental rate of return (∆RoR) analysis. MARR =10% First costO &M Cost/yearA B C$15,000 $21,2001,600 700Benefit/year8,000Salvage value 3,000Life in years 5$36,0004009,000 13,0004,6006,000D45,0001,00015,00010,000

The incremental rate of return refers to the financial metric used to evaluate the profitability of…

Answered: Given the financial data for four…

Given the financial data for four mutually exclusive alternatives in the table below, determine the best alternative using the incremental rate of return (∆RoR) analysis. MARR =10%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Theoretically, when we are going through the procedure to calculate the incremental ROR (ΔROR), we…

A: When there are two competing investment possibilities with differing investment quantities, the…

Q: Two mutually exclusive design alternatives are being considered. The estimated cash flows for each…

A: Present worth refers to the discounted value of the future cash flows . More the present of worth of…

Q: Two mutually exclusive design alternatives are being considered. The estimated cash flows for each…

A: Disclaimer- “Since you have asked multiple questions, we will solve the first three questions for…

Q: A total of $150,000 was invested in two different projects identified as A1 and 82. If the overall…

A: Solution: A total of $ 150,000 was invested in two different projects identified as A1 and B2. If…

Q: Q3: Describe examples of common factors for which breakeven analyses might provide useful insights…

A: Break-even analyses: It is an approach used to determine the quantity of a commodity that a firm…

Q: Two mutually exclusive design alternatives are being considered. The estimated cash flows for each…

A: “Since you have posted a question with multiple sub-parts, we will provide the solution only to the…

Q: Amigo Mobility, which manufactures batterypoweredmobility scooters, has $700,000 to invest. The…

A: The first investment (D) is $200,000 and tare of return (R1) is 28%. The second investment (W) is…

Q: A cement grinding mill “A” with a capacity of 50 tons per hour utilizes forged steel grinding balls…

A: Given: Mill A: Capacity per hour=50 tons Cost per ton=P12000 Wear rate per ton cement milled=100…

Q: To choose the best alternative among the given alternatives in the annual cash flow analysis method,…

A: The equivalent uniform annual worth refers to the value of a series of cashflows at some point in…

Q: Consider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis…

A: The annual worth is the net of the multitude of advantages and costs brought about more than a…

Q: If you invest $5,095 in a long-term venture, you will receive $1,000 per year forever. Assuming your…

A: The objective of this question is to calculate the capitalized worth of an investment that provides…

Q: For the following table, assume a MARR of 10% per year and a useful life for each alternative of six…

A: The objective of the question is to determine the preferred alternative based on the Internal Rate…

Q: The owners of a discount motel chain are considering building a new motel. Optimistic, pessimistic,…

A: Answer image:a)Present worth under pessimistic extimate is found as followsPresent worth = $…

Q: Capital Investment $100,000 $152,000 $184,000 $75,000 Annual Revenues less expenses 15,200 31,900…

A: There is 4 mutually exclusive alternative with their costs and revenues are given. MARR is 15% and…

Q: In order for a higher-cost alternative to be attractive, the value for the incremental net present…

A: The objective of the question is to determine the condition under which a higher-cost alternative…

Q: what is the rate of return for each alternative and for the incremental difference? if the MARR is…

A: The net gain or loss of associate investment over a particular period of time, explicit as a…

Q: Currently, the beta for NW offices is 1.8 and IPD index for NW offices is 10%. Given the redemption…

A: Question 10 Currently, the beta for NW offices is 1.8 and IPD index for NW offices is 10%. The…

Q: The product development group of a high-tech electronics company developed five proposals for new…

A: Hi Student, Thanks for posting the question. As per the guideline, we are providing answer for the…

Q: At the Motorola plant in Mesa, Arizona, it is desired to determine whether one-inch-thick insulation…

A: Engineering social science, called engineering economy, is a branch of social science involved with…

Q: What is the rate of return for the following incremental analysis. Investment 1 2 Initial Investment…

A: Incremental analysis: Incremental analysis is a decision-making technique used in business to…

Q: The four alternatives described below are being evaluated. a. If the proposals are independent,…

A: Investment is the practise of putting money into a product or asset that is purchased to produce…

Q: Estimates for a proposed small public facility are as follows: Plan A has a first cost of $45,000, a…

A: Plan A Plan B First Cost 45,000 95,000 Annual Maintenance 1,000 7,000 for 15 years and 950 for…

Question

1) Given the financial data for four mutually exclusive alternatives in the table below, determine the best alternative using the incremental rate of return (∆RoR) analysis. MARR =10%

First cost
O &M Cost/
year
A B C
$15,000 $21,200
1,600 700
Benefit/year
8,000
Salvage value 3,000
Life in years 5
$36,000
400
9,000 13,000
4,600
6,000
D
45,000
1,000
15,000
10,000

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Definition of incremental rate of return

VIEW

Step 2: Calculation of incremental rate of return

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

For Annual Worth analysis, when you have variable costs and benefits, the proper analysis approach would be to: Group of answer choices None of the above Maximize EUAB Maximize NPW Maximize (EUAB - EUAC) Maximize PW of Benefits
Three different plans were presented to the GAO (General Accounting Office) by a high-tech facilities manager for operating a portable cyber-security facility. Plan A: Renewable 1-year contracts with payments of $1 million at the beginning of each year. Plan B: A 2-year contract that requires three payments of $600,000 each, with the first one to be made immediately and the second and third payment made at the beginning of the following two 6-month intervals; no payments required during the second year of the contract. Plan C: A 3-year contract that entails a payment of $1.5 million now and another payment of $0.5 million 2 years from now. Assuming the GAO can renew any of the plans under the same conditions, if it decides to do so, which plan is best on the basis of a present worth analysis at an interest rate of 6% per year, compounded semiannually? Solve using (a) factors and (b) a spreadsheet. (Hint: Construct a cash flow diagram before working this problem.)
A manufacturer of automated optical inspection (AOI) devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the ERR method to determine which alternative should be selected if the reinvestment rate equals the company's MARR of 4% per year. Assume you already know that the ERR of Alternative M is 4.11%. Alternative Initial costs Net annual cash flow Life, years M N $30,000 $45,000 $4,500 $7,000 8 8
Four mutually exclusive service alternatives are under consideration for automating a manufacturing operation. The alternatives were ranked in order of increasing initial investment and then compared by incremental rate of return analysis. The rate of return on each increment of investment was less than the MARR. Which alternative should be selected?
A total of $50,000 was allocated to a project to detect and reduce insider theft in the ZipCar auto parts store. Two alternatives identified as Y and Z are under consideration. The overall ROR on the $50,000 is expected to be 40%, with the rate of return on the $20,000 increment between Y and Z at 15% per year. If Z is the higher first-cost alternative, (a) what is the size of the investment required in Y, and (b) what is the rate of return on Y?
In general, the IRR comparison method and the PW comparison method Question options: A produce the same decisions for independent projects but not for mutually exclusive projects B produce the same decisions for mutually exclusive projects but not for independent projects C produce different decisions for both independent projects and mutually exclusive projects D produce the same decisions for both independent projects and mutually exclusive projects E produce the same decisions for projects with unequal lives
Two alternative investments are being considered. Design A has an initial cost of $3 million and annual cost of 135,000 dollars per year. Design B has an initial cost of $3.7 million and annual cost of 70,000 dollars per year. What is the rate of return of design B as compared to design A? Hint it is between 5% and 10%. MY Answer is 9.29 % is it correct?
Two mutually exclusive design alternatives are being considered. The estimated cash flows for each alternative are given below. The MARR is 12% per year. The decision-maker can select one of these alternatives or decide to select none of them. Make a recommendation based on the following methods. Design Y a. Based on PW method, Design is more economical. b. The modified B/C ratio of Design Y is The modified B/C ration of Design Z is c. The incremental B/C ratio is (Round to two decimal places) Therefore, based on the B/C ratio method, Design Investment cost Annual revenue Annual cost Useful life Salvage value (Round to two decimal places) (Round to two decimal places) d. The discounted payback period of Design Y is The discounted payback period of Design Z is Net PW is is more economical years (Round to one decimal place) years (Round to one decimal place) $140,000 $51,725 $9,672 15 years $14,700 $149,103 Design Z $275,000 $84,946 $18,059 15 years $33,000 $186,587 Therefore, based on…
Answer it ASAP with step by step solution
Compare three alternatives on the basis of their capitalized costs at i=9.00% per year and select the best alternative. (Include a minus sign if necessary.) The capitalized cost of alternative E is $ ox, alternative F is $1375347.55, and alternative G is $ The best alternative is
Beaver, a city in the United States, is attempting to attract a professional soccer team. Beaver is planning to build a new stadium that will cost $240 million. The annual upkeep is expected to amount to $830,000. The turf will have to be replaced every 9 years at a cost of $860,000. Painting every 8 years will cost $88,000. If the city expects to maintain the facility indefinitely, what is the estimated capitalized cost at i = 9% per year? The estimated capitalized cost is $
Two roadway designs are under consideration for access to a permanent suspension bridge. Design 1A will cost $3 million to build and $100,000 per year to maintain. Design 1B will cost $3.5 million to build and $40,000 per year to maintain. Both designs are assumed to be permanent. Use an AWbased rate of return equation to determine (a) the breakeven ROR, and (b) which design is preferred at a MARR of 10% per year.