Schneeberger, Inc. is considering investing in one of two alternatives for increasing the acceleration of its linear motor actuators. The first, alternative X, requires an initial investment of $190,000 and its cash flows exhibit an annual rate of return of i'x = 20%. The second, alternative Y, requires an initial investment of $130,000 and its cash flows have an annual rate of return of Y = 22%. Schneeberger's MARR is 20% per year. Answer the following questions; (a) Will the rate of return on the incremental investment in X be larger or smaller than X? (b) What is the expected X-Y? The rate of return on the increment is less than 20% per year. The expected tXy is %.
Schneeberger, Inc. is considering investing in one of two alternatives for increasing the acceleration of its linear motor actuators. The first, alternative X, requires an initial investment of $190,000 and its cash flows exhibit an annual rate of return of i'x = 20%. The second, alternative Y, requires an initial investment of $130,000 and its cash flows have an annual rate of return of Y = 22%. Schneeberger's MARR is 20% per year. Answer the following questions; (a) Will the rate of return on the incremental investment in X be larger or smaller than X? (b) What is the expected X-Y? The rate of return on the increment is less than 20% per year. The expected tXy is %.
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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Transcribed Image Text:Schneeberger, Inc. is considering investing in one of two alternatives for increasing the acceleration of its linear motor actuators. The
first, alternative X, requires an initial investment of $190,000 and its cash flows exhibit an annual rate of return of i'x = 20%. The
second, alternative Y, requires an initial investment of $130,000 and its cash flows have an annual rate of return of Y = 22%.
Schneeberger's MARR is 20% per year. Answer the following questions; (a) Will the rate of return on the incremental investment in X
be larger or smaller than X? (b) What is the expected X-Y?
The rate of return on the increment is less than
20% per year.
The expected tXy is
%.
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