Investment Initial Investment Annual Return 1 $25,000 $7,500 $40,000 $12,000 3 $85,000 $20,000 4 $100,000 $22,000 5 $65,000 $17,000 In addition to the original opportunity statement, CustomMetalworks has determined that investments 3 and 4 are mutually exclusive and investment 5 is contingent on either investment 1 or 2 being funded. d. Now, which alternatives should be selected? e. What is the present worth for the optimum investment portfolio? f. What is the IRR for the optimum investment portfolio? Reconsider the original problem: 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 14.4%, and (3) a MARR of 9.6%.
Investment Initial Investment Annual Return 1 $25,000 $7,500 $40,000 $12,000 3 $85,000 $20,000 4 $100,000 $22,000 5 $65,000 $17,000 In addition to the original opportunity statement, CustomMetalworks has determined that investments 3 and 4 are mutually exclusive and investment 5 is contingent on either investment 1 or 2 being funded. d. Now, which alternatives should be selected? e. What is the present worth for the optimum investment portfolio? f. What is the IRR for the optimum investment portfolio? Reconsider the original problem: 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 14.4%, and (3) a MARR of 9.6%.
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
CustomMetalworks is considering the expansion of their cable fabrication business for towers, rigging, winches, and many other uses. They have available $250,000 for investment and have identified the following indivisible alternatives, each of which will provide an exit with full return of the investment at the end of a 5-year planning horizon. Each year, custom Metalworks will receive an annual return as noted below. MARR is 12%. For the original problem: a. Which alternatives should be selected by Custom Metalworks? b. What is the present worth for the optimum investment portfolio ? c. What is the
Transcribed Image Text:Investment Initial Investment Annual Return
1
$25,000
$7,500
$40,000
$12,000
3
$85,000
$20,000
4
$100,000
$22,000
5
$65,000
$17,000
Transcribed Image Text:In addition to the original opportunity statement, CustomMetalworks has
determined that investments 3 and 4 are mutually exclusive and
investment 5 is contingent on either investment 1 or 2 being funded.
d. Now, which alternatives should be selected?
e. What is the present worth for the optimum investment portfolio?
f. What is the IRR for the optimum investment portfolio?
Reconsider the original problem:
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 14.4%, and
(3) a MARR of 9.6%.
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