Initial Annual Annual Salvage Value Investment Investment Receipts Disbursements 1 $300,000 $205,000 $125,000 $50,000 $400,000 $230,000 $130,000 $50,000 3 $450,000 $245,000 $140,000 $60,000 4 $500,000 $260,000 $135,000 $75,000 5 $600,000 $290,000 $150,000 $75,000 2. In addition to the original opportunity statement, Bayer declares that investments 2 and4 are mutually exclusive, investment 5 is contingent on 2 being funded, and at least two investments must be made. d. Now, which alternatives should be selected by Bayer? e. What is the present worth for the resulting investment portfolio? f What is the resulting IRR? Again consider the original opportunity statement: g. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current limit on investment capital, (2) plus 20%, and (3) minus 20%. h. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current MARR, (2) a MARR of 12%, and (3) a MARR of 8%.
Initial Annual Annual Salvage Value Investment Investment Receipts Disbursements 1 $300,000 $205,000 $125,000 $50,000 $400,000 $230,000 $130,000 $50,000 3 $450,000 $245,000 $140,000 $60,000 4 $500,000 $260,000 $135,000 $75,000 5 $600,000 $290,000 $150,000 $75,000 2. In addition to the original opportunity statement, Bayer declares that investments 2 and4 are mutually exclusive, investment 5 is contingent on 2 being funded, and at least two investments must be made. d. Now, which alternatives should be selected by Bayer? e. What is the present worth for the resulting investment portfolio? f What is the resulting IRR? Again consider the original opportunity statement: g. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current limit on investment capital, (2) plus 20%, and (3) minus 20%. h. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current MARR, (2) a MARR of 12%, and (3) a MARR of 8%.
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
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Question
A laboratory within Bayer is considering the five indivisible investment proposals below to further upgrade their diagnostic capabilities to ensure continued leadership and state-of-the-art performance. The laboratory uses a 10-year planning horizon, has a MARR of 10%, and a capital limit of $1,000,000. For the original opportunity statement: a. Which alternatives should be selected to form the optimum portfolio for the lab? b. What is the present worth for the optimum investment portfolio? c. What is the IRR for the portfolio?
Transcribed Image Text:Initial
Annual
Annual
Salvage
Value
Investment Investment
Receipts
Disbursements
1
$300,000
$205,000
$125,000
$50,000
$400,000
$230,000
$130,000
$50,000
3
$450,000
$245,000
$140,000
$60,000
4
$500,000
$260,000
$135,000
$75,000
5
$600,000
$290,000
$150,000
$75,000
2.
Transcribed Image Text:In addition to the original opportunity statement, Bayer declares that
investments 2 and4 are mutually exclusive, investment 5 is contingent on
2 being funded, and at least two investments must be made.
d. Now, which alternatives should be selected by Bayer?
e. What is the present worth for the resulting investment portfolio?
f What is the resulting IRR?
Again consider the original opportunity statement:
g. Determine the optimum portfolio (state the investments selected and the
portfolio PW) using (1) the current limit on investment capital, (2) plus
20%, and (3) minus 20%.
h. Determine the optimum portfolio (state the investments selected and the
portfolio PW) using (1) the current MARR, (2) a MARR of 12%, and (3)
a MARR of 8%.
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