Two sites are being considered for building prefabricated homes. The two sites differ in their initial construction and annual costs and revenues. Assume a 20-year planning horizon for each site. Site X Site Y $8.2 M $7.5 M Initial Cost Annual Costs $0.7 M $0.6 M Annual Revenues $1.9 M $1.7 M (a) Using a MARR of 12 %, which site would you select based on its PW? (b) Is the internal rate of return (IRR) for site X closer to 12% or 14%? (c) Is the external rate of return (FRR) for site X closer to 12% or 14%2
Two sites are being considered for building prefabricated homes. The two sites differ in their initial construction and annual costs and revenues. Assume a 20-year planning horizon for each site. Site X Site Y $8.2 M $7.5 M Initial Cost Annual Costs $0.7 M $0.6 M Annual Revenues $1.9 M $1.7 M (a) Using a MARR of 12 %, which site would you select based on its PW? (b) Is the internal rate of return (IRR) for site X closer to 12% or 14%? (c) Is the external rate of return (FRR) for site X closer to 12% or 14%2
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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100%
Do not use excel please. Show equations used.
![Notes: Every MARR is given as an effective annual rate unless stated otherwise. Show each rate of
return as a percentage with 2 decimal places such as 6.37%. You may round off all PW, AW, or FW
values to the nearest dollar.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdfe80350-6fa1-469d-aae2-95b4dd3aa499%2F00290f8b-4c4a-4eac-9452-5c9d87ab1143%2Fj1j4yt9_processed.png&w=3840&q=75)
Transcribed Image Text:Notes: Every MARR is given as an effective annual rate unless stated otherwise. Show each rate of
return as a percentage with 2 decimal places such as 6.37%. You may round off all PW, AW, or FW
values to the nearest dollar.
![Two sites are being considered for building prefabricated homes. The two sites differ in their
initial construction and annual costs and revenues. Assume a 20-year planning horizon for each site.
Site X
Site Y
$8.2 M
$7.5 M
Initial Cost
Annual Costs
$0.7 M
$0.6 M
Annual Revenues
$1.9 M
$1.7 M
(a) Using a MARR of 12 %, which site would you select based on its PW?
(b) Is the internal rate of return (IRR) for site X closer to 12% or 14%?
(c) Is the external rate of return (ERR) for site X closer to 12% or 14%?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdfe80350-6fa1-469d-aae2-95b4dd3aa499%2F00290f8b-4c4a-4eac-9452-5c9d87ab1143%2F77fojms_processed.png&w=3840&q=75)
Transcribed Image Text:Two sites are being considered for building prefabricated homes. The two sites differ in their
initial construction and annual costs and revenues. Assume a 20-year planning horizon for each site.
Site X
Site Y
$8.2 M
$7.5 M
Initial Cost
Annual Costs
$0.7 M
$0.6 M
Annual Revenues
$1.9 M
$1.7 M
(a) Using a MARR of 12 %, which site would you select based on its PW?
(b) Is the internal rate of return (IRR) for site X closer to 12% or 14%?
(c) Is the external rate of return (ERR) for site X closer to 12% or 14%?
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