Schneeberger, Inc. is considering two alternatives to increase the acceleration of its linear motor actuators. The initial investment required in alternative X is $200,000 and in Y is $150,000. The MARR = 20% per year; a total of $200,000 is available for investment; and the rates of return are i * X = 22% and i * Y = 25% per year. (a) Will the rate of return on the increment of investment between alternatives X and Y be larger or smaller than i*X ? larger or smaller than i * Y? (b) What is the expected i * X-Y?
Schneeberger, Inc. is considering two alternatives to increase the acceleration of its linear motor actuators. The initial investment required in alternative X is $200,000 and in Y is $150,000. The MARR = 20% per year; a total of $200,000 is available for investment; and the rates of return are i * X = 22% and i * Y = 25% per year. (a) Will the rate of return on the increment of investment between alternatives X and Y be larger or smaller than i*X ? larger or smaller than i * Y? (b) What is the expected i * X-Y?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Schneeberger, Inc. is considering two alternatives
to increase the acceleration of its linear motor actuators.
The initial investment required in alternative
X is $200,000 and in Y is $150,000. The
MARR = 20% per year; a total of $200,000 is available
for investment; and the
22% and i * Y = 25% per year. (a) Will the rate of return
on the increment of investment between alternatives
X and Y be larger or smaller than i*X ? larger
or smaller than i * Y? (b) What is the expected i * X-Y?
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