well as a fifth choice: do nothing. Each alternative has a 5-year useful life. 2 3 Initial cost $100,000 $130,000 $200,000 $330,000 Uniform annual 26.38 38.78 47.48 91.55 net income ($000s) Rate of return 10% 15% 6% 12%
well as a fifth choice: do nothing. Each alternative has a 5-year useful life. 2 3 Initial cost $100,000 $130,000 $200,000 $330,000 Uniform annual 26.38 38.78 47.48 91.55 net income ($000s) Rate of return 10% 15% 6% 12%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:8-21 A firm is considering the following alternatives, as
well as a fifth choice: do nothing. Each alternative
has a 5-year useful life.
1
2
3
4
Initial cost
$100,000 $130,000 $200,000 $330,000
Uniform annual
26.38
38.78
47.48
91.55
net income ($000s)
Rate of return
10%
15%
6%
12%
(a) Construct a choice table for interest rates from
0% to 100%.
(b) The firm's minimum attractive rate of return is
8%. Which alternative should be selected?
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