the current cash flows, find the current IRR on this project. Use linear interpolation with x, = 7% and x, 8% to find your answer. ent IRR of this project is O percent he final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed.) is the current MARR? ant MARR is O percent he final answer to two decimal places as needed. Round al intermediate values to six decimal places as needed) s they invest? es, they should invest, as the current rate of retum exceeds the MARR. o, they should not invest, as the irrigation system is an extraneous purchase. 1o, they should not invest, as the project's first cost is too high. to, they should not invest, as the current rate of return exceeds the MARR.
the current cash flows, find the current IRR on this project. Use linear interpolation with x, = 7% and x, 8% to find your answer. ent IRR of this project is O percent he final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed.) is the current MARR? ant MARR is O percent he final answer to two decimal places as needed. Round al intermediate values to six decimal places as needed) s they invest? es, they should invest, as the current rate of retum exceeds the MARR. o, they should not invest, as the irrigation system is an extraneous purchase. 1o, they should not invest, as the project's first cost is too high. to, they should not invest, as the current rate of return exceeds the MARR.
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:A group of farmers in Inverness is considering building an irrigation system from a water supply in some nearby mountains. They want to build a concrete reservoir with a steel pipe system. The first cost would be $230,000 with (current) annual maintenance costs of $2500. They expect the irrigation system will bring them
$25,500 per year in additional (current) revenues due to better crop production. Their real dollar MARR is 3 percent, and they anticipate inflation to be 2 percent per year. Assume the reservoir will have a 20-year life.
a. Using the current cash flows, find the current IRR on this project. Use linear interpolation with x, = 7% and x, = 8% to find your answer.
The current IRR of this project is percent.
(Round the final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed.)
b. What is the current MARR?
The current MARR is percent.
(Round the final answer to two decimal places as needed. Round all intermediate values to six decimal places as needed.)
c. Should they invest?
O A. Yes, they should invest, as the current rate of return exceeds the MARR.
O B. No, they should not invest, as the irrigation system is an extraneous purchase.
O C. No, they should not invest, as the project's first cost is too high.
O D. No, they should not invest, as the current rate of return exceeds the MARR.
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