Management of Cullumber, Inc., is considering investing in three independent projects. The costs and the cash flows are given in thefollowing table. The appropriate cost of capital is 13.46 percent.Year01234Project 1-$250,00063,00081,10078,000101,200Project 2-$323,400The IRR of project 1 is152,525168,350105,900Compute the project IRRs. (Round final answers to 2 decimal places, e.g. 15.25%.)Project 3-$500,000197,100197,100197,100197,100Identify the projects that should be accepted.Cullumber should accept project(s)%, project 2 is%, and project 3 is

The internal rate of return (IRR) is the discount rate that gives a future sequence of cash flows a…

Management of Cullumber, Inc., is considering investing in three independent projects. The costs and the cash flows are given in the following table. The appropriate cost of capital is 13.46 percent. Year Project 1 0 1 2 3 4 Project 2 -$250,000 -$323,400 63,000 81,100 78,000 101,200 152,525 The IRR of project 1 is 168,350 105,900 Project 3 -$500,000 197,100 197,100 197,100 197,100 Compute the project IRRs. (Round final answers to 2 decimal places, e.g. 15.25%) %, project 2 is %, and project 3 is

Management of Cullumber, Inc., is considering investing in three independent projects. The costs and the cash flows are given in the following table. The appropriate cost of capital is 13.46 percent. Year Project 1 0 1 2 3 4 Project 2 -$250,000 -$323,400 63,000 81,100 78,000 101,200 152,525 The IRR of project 1 is 168,350 105,900 Project 3 -$500,000 197,100 197,100 197,100 197,100 Compute the project IRRs. (Round final answers to 2 decimal places, e.g. 15.25%) %, project 2 is %, and project 3 is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Select the correct answer from the terms provided to complete the sentences below. There are more answers than questions, therefore some of the items will remain unused. 1 Higher Reinvestment rate 3 MARR -100% to plus Infinity 6 Cash flow series Cumulative cash flows 8 Zero to one Lower 10 /"rate 11 Principal amount Non-conventional 12 Equal to or less than 13 Match each of the options above to the items below. For an Investment, the Interest rate is the rate of interest earned on the When the algebraic signs on the net cash flows change more than once, the cash flow sequence is called When there is more than one sign change in the net cash flows, multiple values are possible in the range of The total number or real values is always the number of sign changes in the cumulative cash flow sequence. The composite rate of return assumes that net positive cash flows not Immediately needed by the project are reinvested at the Norstrom's criterion uses the to determine if a unique rate may…
K Most likely estimates for a project are as follows. MARR Useful life Initial investment Receipts - Expenses (R-E) Determine whether the statement "This project (based upon the most likely estimates) is profitable." is true or false. Click the icon to view the relationship between the PW and the percent change in parameter. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15per year. Choose the correct choice below. False True 15% per year 4 years $3,500 $1,600/year TUB
Consider the following analysis of two alternatives, X & Y: YR X Y 0 -200 -1000 1 50 250 2 50 250 3 50 250 4 50 250 5 100 300 The MARR is 10%. Calculate the incremental rate of return in percent to the nearest 0.1 percent.
Question 3 A project with the following costs are under consideration to determine its profitability. Using the IRR comparison, and an annual MARR of 10% compounded semiannually, determine if the project should be executed First cost $45,000 Semiannual operating cost $10,000 Semiannual income $20,000 Salvage value $20,000 Life in years 4 years Oa. IRR = 17% semiannual Ob. IRR= 18.7% semiannual O IRR = 16.9% semiannual Od. IRR 15.3% semiannual
Time left 0:14:27 A company is considering two machines. Machine X has a first cost of $30,000, AOC of $18,000, and S of $7000 after 4 years. Machine Y will cost $50,000 with an AOC of $16,000 and 5 of $9000 after 6 years. The AW equations for Machine X and Y at 12% interest rates, are: Select one: O a. AWX=-30,000(A/P,12%, 12)-18,000 +7,000(A/F, 12%, 12); AWY= -50,000(A/P, 12%, 12)-16,000+ 9,000(A/F,12%, 12) O b. AWX=-30,000(A/P, 12%, 4) -18,000 +7,000(A/F, 12%6,4); AWY= -50,000(A/P,12%,6)-16,000+ 9,000(A/F,12%,6) OC. AWX=-30,000(A/P, 12%, 24) -18,000 +7,000(A/F,12%,24); AWY -50,000(A/P,12%, 24) -16,000+ 9,000(A/F, 12%,24) O d. AWX=-30,000(A/P, 12 %, 6) -18,000 +7,000(A/F, 12%,6); AWY= -50,000(A/P,12%,6) -16,000+ 9,000(A/F, 12 %,6) Which of the following statements is correct? O a. MARR is set higher than the WACC b. MARR is set by the financial manager of a company. OcA project that is economically justified should have a ROR higher than MARR.
All else being constant, if estimated future cash flows increase, the internal rate of return will decrease. Ochange in an indeterminate way. remain the same. increase.
Project 1 involves an outlay of $2.5m and gets an annual net income of $1m for 5 years. Project 2 involves an outlay of $10m but gets no income until year 5. year project 1 project 2 0 -2.5 -10 1 1 0 2 1 0 3 1 0 4 1 0 5 1 15 Use the payback method to decide which is the most attractive project. __________ What is the accounting rate of return for project 1? Write your answer as a percent using the percent symbol. ________ What is the accounting rate of return for project 2? Write your answer as a percent using the percent symbol. _________ Decide which is the most attractive project using the accounting rate of return method. ________________
The company's interest rate (MARR) is 12%. Which extruder should the Styrofoam Company choose? Use Annual Cash Flow Analysis. Given a MARR of 10%, use incremental analysis to determine which of the following alternatives should be selected (if any). Each has an expected life of ten years. Plan 1 2 3 4 Null First Cost $220,000 $100,000 $265,000 $180,000 $0 Annual Benefit 39,000 15,000 51,000 26,000
11_The sign of various amounts at different points in time in a cash flow diagram is to be decided based on the type of the decision problem Select one:TrueFalse
You are the boss of a consulting firm. One of your clients has brought to you a new project. The client s asking for an initial investment of $35,000. The project will return $5,000 for the next 4 years. If the company has a MARR set at 12%, what method would you use to evaluate this project? O Present Worth Method O Annual Worth Method O Future Worth Method O Internal Return Rate O External Return Rate
Question 4 A local company is considering in investing in new, more productive equipment Data concerning the three best aternatives are show below. The useful life of the equipment is 20 years and MARR =9K What is the incremental return on the first incremental pair (ahen andered by increasing investment) RRI Ars What is the incremental IRR on the second pair? Ars Which alternative would you select? Ans. X B C Initial S66.000.00 $55,000.00 $23.500.00 $17,32000 investment $7.830.00 Annual net $6.093.00 $3.177.00 $165300 income Salvage value $4.500.00 $3.23200 $1.73a0 1237% S8.230.00 10.40% 7.465 9.35% IRR
P8) Consider the cash flow given below. MARR = 10% Time 0 Cash flow -500 3 4 5 6 320 120 -150 1 2 320 120 -150 a. Find the undiscounted payback period. b. Find the discounted payback period. 7 320 8 9 -150 120 10 11 220 220