(the Scream Machine) at a theme park. Alternative A required a $300,000 investment, produced after-tax net annual revenue of $55,000, and had a negligible salvage value at the end of the 10-year planning horizon. Alternative B required a $450,000 investment, generated after-tax net annual revenue of $80,000, and also had a negligible salvage value at the end of the 10-year planning horizon. Based on an after-tax MARR of 10% and using a future worth analysis, which alternative, is the economic choice? O a) The do-nothing alternative will be selected. b) Alternative A and Future value will be calculated as follows: FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=- $300,000(2.59374)+$55,000(15.93742)=$98,436.10 c) None of the above d) Alternative B and Future value will be calculated as follows: FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=- $450,000(2.59374)+$80,000(15.93742)=$107,810.60
(the Scream Machine) at a theme park. Alternative A required a $300,000 investment, produced after-tax net annual revenue of $55,000, and had a negligible salvage value at the end of the 10-year planning horizon. Alternative B required a $450,000 investment, generated after-tax net annual revenue of $80,000, and also had a negligible salvage value at the end of the 10-year planning horizon. Based on an after-tax MARR of 10% and using a future worth analysis, which alternative, is the economic choice? O a) The do-nothing alternative will be selected. b) Alternative A and Future value will be calculated as follows: FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=- $300,000(2.59374)+$55,000(15.93742)=$98,436.10 c) None of the above d) Alternative B and Future value will be calculated as follows: FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=- $450,000(2.59374)+$80,000(15.93742)=$107,810.60
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
Can some one please help me to answer each question correctly? please and thank you.
Transcribed Image Text:We plan to compare economically two design alternatives (A and B) for a new ride
(the Scream Machine) at a theme park. Alternative A required a $300,000
investment, produced after-tax net annual revenue of $55,000, and had a negligible
salvage value at the end of the 10-year planning horizon. Alternative B required a
$450,000 investment, generated after-tax net annual revenue of $80,000, and also
had a negligible salvage value at the end of the 10-year planning horizon. Based on
an after-tax MARR of 10% and using a future worth analysis, which alternative, is the
economic choice?
a) The do-nothing alternative will be selected.
O b) Alternative A and Future value will be calculated as follows:
FWA =-$300,000(F/P, 10%,10)+$55,000(F/A, 10%,10)=-
$300,000(2.59374)+$55,000(15.93742)=$98,436.10
c) None of the above
d) Alternative B and Future value will be calculated as follows:
FWB =-$450,000(F/P, 10%,10)+$80,000(F/A, 10%,10)=-
$450,000(2.59374)+$80,000(15.93742)=$107,810.60
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