Suppose you have the following two investment projects with operating costs and revenues over 5 years: Year Project A Project B Revenues Operating Costs Revenues Operating Costs (OMR) (OMR) (OMR) (OMR) 2025 12000 5000 50000 33000 2026 12500 5300 52000 34500 2027 13500 5700 53800 35000 2028 13800 6000 54000 36000 2029 14200 6200 45500 36500 2030 15000 6500 55000 37000 If the investment cost is OMR25000 for project A and OMR155000 for project B, determine which project is the best choice using ARR and IRR methods (Interest rate is 10%).
Suppose you have the following two investment projects with operating costs and revenues over 5 years: Year Project A Project B Revenues Operating Costs Revenues Operating Costs (OMR) (OMR) (OMR) (OMR) 2025 12000 5000 50000 33000 2026 12500 5300 52000 34500 2027 13500 5700 53800 35000 2028 13800 6000 54000 36000 2029 14200 6200 45500 36500 2030 15000 6500 55000 37000 If the investment cost is OMR25000 for project A and OMR155000 for project B, determine which project is the best choice using ARR and IRR methods (Interest rate is 10%).
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
Related questions
Question
![Suppose you have the following two investment projects with operating costs and
revenues over 5 years:
Year
Project A
Project B
Revenues
Operating Costs Revenues
Operating Costs
(OMR)
(OMR)
(OMR)
(OMR)
2025
12000
5000
50000
33000
2026
12500
5300
52000
34500
2027
13500
5700
53800
35000
2028
13800
6000
54000
36000
2029
14200
6200
45500
36500
2030
15000
6500
55000
37000
If the investment cost is OMR25000 for project A and OMR155000 for
project B, determine which project is the best choice using ARR and IRR
methods (Interest rate is 10%).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5385efb1-7986-427a-a493-459d8ecb6457%2Fb894cdd7-054f-4039-afeb-340a2c830c79%2F9h8e8cd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose you have the following two investment projects with operating costs and
revenues over 5 years:
Year
Project A
Project B
Revenues
Operating Costs Revenues
Operating Costs
(OMR)
(OMR)
(OMR)
(OMR)
2025
12000
5000
50000
33000
2026
12500
5300
52000
34500
2027
13500
5700
53800
35000
2028
13800
6000
54000
36000
2029
14200
6200
45500
36500
2030
15000
6500
55000
37000
If the investment cost is OMR25000 for project A and OMR155000 for
project B, determine which project is the best choice using ARR and IRR
methods (Interest rate is 10%).
![Average Total Cost in the Short and Long Run
Average
Total
in short
C run
smailih
factory
A
in short
C run
mediithn
factory
A
in short
C run
largth
factory
A
Cos
in long run
C
$12,00
0.
10,000
Economie
Constan
iteturns to
sdal
scal
Diseconomie
e
e
S
sal
1,00 1,20
Quantit
Carfs per gav](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5385efb1-7986-427a-a493-459d8ecb6457%2Fb894cdd7-054f-4039-afeb-340a2c830c79%2F8sht7g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Average Total Cost in the Short and Long Run
Average
Total
in short
C run
smailih
factory
A
in short
C run
mediithn
factory
A
in short
C run
largth
factory
A
Cos
in long run
C
$12,00
0.
10,000
Economie
Constan
iteturns to
sdal
scal
Diseconomie
e
e
S
sal
1,00 1,20
Quantit
Carfs per gav
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