Two mutually-exclusive projects P2 and P3 are being considered for an investment. One of them must be chosen. Thus there is no "do-nothing" alternative. The cash flows for the projects are given in the table below: Year P2 P3 lo -$1,900,000 -$4,900,000 $803,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 12 $803,000 3 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 14 15 16 7 9 $1,503,000 10 $1,503,000 11 $1,503,000 12 $1,503,000 $1,503,000 $1,503,000 13 14 15 $1,503,000 16 $1,503,000 $1,503,000 $1,503,000 17 18 $803,000 $803,000 $803,000 19 $1,503,000 20 $1,503,000 MARR is 20% and we are using incremental analysis to choose one of these two projects. (a) The Present Worth at MARR of the incremental investment [P3-P2] is (b) Therefore, the following project should be accepted:
Two mutually-exclusive projects P2 and P3 are being considered for an investment. One of them must be chosen. Thus there is no "do-nothing" alternative. The cash flows for the projects are given in the table below: Year P2 P3 lo -$1,900,000 -$4,900,000 $803,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 $1,503,000 12 $803,000 3 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 $803,000 14 15 16 7 9 $1,503,000 10 $1,503,000 11 $1,503,000 12 $1,503,000 $1,503,000 $1,503,000 13 14 15 $1,503,000 16 $1,503,000 $1,503,000 $1,503,000 17 18 $803,000 $803,000 $803,000 19 $1,503,000 20 $1,503,000 MARR is 20% and we are using incremental analysis to choose one of these two projects. (a) The Present Worth at MARR of the incremental investment [P3-P2] is (b) Therefore, the following project should be accepted:
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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Question
![Two mutually-exclusive projects P2 and P3 are being considered for an investment. One of them must be chosen. Thus there is no "do-nothing"
alternative.
The cash flows for the projects are given in the table below:
Year
P2
P3
-$1,900,000
$803,000
$803,000
$803,000
-$4,900,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
1
2
3
4
5
$803,000
$803,000
$803,000
$803,000
$803,000
$803,000
$803,000
$803,000
6
7
19
10
11
12
$803,000
$803,000
$803,000
$803,000
13
14
15
$803,000
$803,000
$803,000
$803,000
$803,000
16
17
18
19
20
MARR is 20% and we are using incremental analysis to choose one of these two projects.
(a) The Present Worth at MARR of the incremental investment [P3-P2] is
(b) Therefore, the following project should be accepted:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b3c2d2e-41b0-4b6a-9f1b-69af3a030863%2F825f3c98-a3f9-4cee-9332-dbf91270c7d3%2Fxf67q7_processed.png&w=3840&q=75)
Transcribed Image Text:Two mutually-exclusive projects P2 and P3 are being considered for an investment. One of them must be chosen. Thus there is no "do-nothing"
alternative.
The cash flows for the projects are given in the table below:
Year
P2
P3
-$1,900,000
$803,000
$803,000
$803,000
-$4,900,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
$1,503,000
1
2
3
4
5
$803,000
$803,000
$803,000
$803,000
$803,000
$803,000
$803,000
$803,000
6
7
19
10
11
12
$803,000
$803,000
$803,000
$803,000
13
14
15
$803,000
$803,000
$803,000
$803,000
$803,000
16
17
18
19
20
MARR is 20% and we are using incremental analysis to choose one of these two projects.
(a) The Present Worth at MARR of the incremental investment [P3-P2] is
(b) Therefore, the following project should be accepted:
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