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Project A B с D E Cost (thousands) $10 15 5 20 15 Annual Benefit (thousands) Rate of Return $2.98 o 15% 5.58 25 1.53 5.55 4.37 16 12 14

Project A B с D E Cost (thousands) $10 15 5 20 15 Annual Benefit (thousands) Rate of Return $2.98 o 15% 5.58 25 1.53 5.55 4.37 16 12 14

Essentials Of Investments
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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Ten capital spending proposals have been made to the budget committee as the members prepare the annual budget for their firm. Each independent project has a 5-year life and no salvage value. The rest of this question can be found in the attached image (including the table of values). Please solve this by hand without excel.

Project suli A 000 B C D E F 0001 0008 OG azosion H I 000.0 Initial Cost (thousands) $10 1512000.05.58 5 20 15 30 25 10 5 10 Uniform Annual Benefit (thousands) $2.98 1205 oo ylimuhogo Rate of Return 15% 25 1.53 5.55 4.37 9.81 19 7.81 inflate 17 3.49 22 1.67 3.20 16 12 14 20 migno $-16,0 (a) Based on a MARR of 14%, which projects should be approved? (b) Rank-order all the projects according to desirability. (c) If only $70,000 is available, which projects should be approved? (d) Are the results the same if the projects are ranked on IRR? What is the opportunity cost of capital? 000. 18
Transcribed Image Text:Project suli A 000 B C D E F 0001 0008 OG azosion H I 000.0 Initial Cost (thousands) $10 1512000.05.58 5 20 15 30 25 10 5 10 Uniform Annual Benefit (thousands) $2.98 1205 oo ylimuhogo Rate of Return 15% 25 1.53 5.55 4.37 9.81 19 7.81 inflate 17 3.49 22 1.67 3.20 16 12 14 20 migno $-16,0 (a) Based on a MARR of 14%, which projects should be approved? (b) Rank-order all the projects according to desirability. (c) If only $70,000 is available, which projects should be approved? (d) Are the results the same if the projects are ranked on IRR? What is the opportunity cost of capital? 000. 18
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