Null A В C D Life |10 years 10 years 10 years 10 years 10 years 0 $600,000 $800,000 $470,000 $540,000 0 $70,000 $130,000 $65,000 $200,000 Initial investment Salvage value O $400,000 $600,000 $260,000 $320,000 O $130,000 $270,000 $70,000 $120,000 Annual revenues Annual expenses Incremental Rate of Return of “Row"_“Column" Alternative Null C D A C 39% D 36% 18% A 44% ХXXXX 117% В 40% 41% 49% 28%

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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Five investment alternatives form the mutually exclusive, collectively exhaustive set under consideration. The cash flow profiles for the five projects are given in the table below. Information on each investment alternative was fed into a computer program that calculated the IRR(s) and incremental IRR(s) as shown in the table below. Unfortunately, when the table was printed, one of the cells was overprinted with X’s and was unreadable. As the resident expert on incremental IRR analysis, you have been asked to assist. Solve, a. Specify the incremental cash flow profile that must be analyzed to determine the value in the overprinted incremental IRR cell. b. Determine the incremental IRR value that belongs in the over printed cell. c. If MARR is 37%/yr, which investment alternative is preferred? d. Based on the data in the table, if MARR is 40%, specify whether the present worth of each investment alternative would be positive, negative, or zero when evaluated at MARR?

Null
A
В
C
D
Life
|10 years 10 years 10 years 10 years 10 years
0 $600,000 $800,000 $470,000 $540,000
0 $70,000 $130,000 $65,000 $200,000
Initial investment
Salvage value
O $400,000 $600,000 $260,000 $320,000
O $130,000 $270,000 $70,000 $120,000
Annual revenues
Annual expenses
Transcribed Image Text:Null A В C D Life |10 years 10 years 10 years 10 years 10 years 0 $600,000 $800,000 $470,000 $540,000 0 $70,000 $130,000 $65,000 $200,000 Initial investment Salvage value O $400,000 $600,000 $260,000 $320,000 O $130,000 $270,000 $70,000 $120,000 Annual revenues Annual expenses
Incremental Rate of Return of “Row"_“Column"
Alternative
Null
C
D
A
C
39%
D
36%
18%
A
44%
ХXXXX
117%
В
40%
41%
49%
28%
Transcribed Image Text:Incremental Rate of Return of “Row"_“Column" Alternative Null C D A C 39% D 36% 18% A 44% ХXXXX 117% В 40% 41% 49% 28%
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