Three construction jobs are being considered by Clam City Construction (see the accompanying table). Each is characterized by an initial deposit paid by the client to Clam City Construction (CCC), a yearly cost incurred by CCC at the end of each of three years, and a final payment to CCC by the client at the end of three years. CCC has the capacity to do only one of these contracts. Use an appropriate rate of return method to determine which it should choose. The company's MARR is 10 percent. Job 1 2 3 Deposit $100,000 $150,000 $175,000 Cost per Year $75,000 $100,000 $150,000 Final Payment $215,000 $245,000 $310,000 Considering the jobs in order of lowest first cost, the best option is with an incremental rate of return of percent. (Round to one decimal place as needed. Use an approximate ERR if the IRR cannot be used.)
Three construction jobs are being considered by Clam City Construction (see the accompanying table). Each is characterized by an initial deposit paid by the client to Clam City Construction (CCC), a yearly cost incurred by CCC at the end of each of three years, and a final payment to CCC by the client at the end of three years. CCC has the capacity to do only one of these contracts. Use an appropriate rate of return method to determine which it should choose. The company's MARR is 10 percent. Job 1 2 3 Deposit $100,000 $150,000 $175,000 Cost per Year $75,000 $100,000 $150,000 Final Payment $215,000 $245,000 $310,000 Considering the jobs in order of lowest first cost, the best option is with an incremental rate of return of percent. (Round to one decimal place as needed. Use an approximate ERR if the IRR cannot be used.)
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
Am. 392.
Transcribed Image Text:Three construction jobs are being considered by Clam City Construction (see the
accompanying table). Each is characterized by an initial deposit paid by the client to Clam
City Construction (CCC), a yearly cost incurred by CCC at the end of each of three years,
and a final payment to CCC by the client at the end of three years. CCC has the capacity
to do only one of these contracts. Use an appropriate rate of return method to determine
which it should choose. The company's MARR is 10 percent.
Job
1
2
3
Deposit
$100,000
$150,000
$175,000
Cost per Year
$75,000
$100,000
$150,000
Final Payment
$215,000
$245,000
$310,000
Considering the jobs in order of lowest first cost, the best option is
with an incremental rate of return of
percent.
(Round to one decimal place as needed. Use an approximate ERR if the IRR cannot
be used.)
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education