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Year 0 Option #1 Option #2 Option #3 $ (8.00) $ (13.90) $ (24.00) 1 $ 2.60 $ 4.05 $ 2 $ 2.60 $ 4.05 $ 3.00 3 3 69 $ 2.60 $ 4.05 $ 6.00 4 $ 2.60 $ 4.05 $ 9.00 5 69 $ 2.60 $ 4.05 $ 12.00 19 6 $ 2.60 $ 4.05 $ 15.00

Year 0 Option #1 Option #2 Option #3 $ (8.00) $ (13.90) $ (24.00) 1 $ 2.60 $ 4.05 $ 2 $ 2.60 $ 4.05 $ 3.00 3 3 69 $ 2.60 $ 4.05 $ 6.00 4 $ 2.60 $ 4.05 $ 9.00 5 69 $ 2.60 $ 4.05 $ 12.00 19 6 $ 2.60 $ 4.05 $ 15.00

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter19: The Basic Tools Of Finance
Section: Chapter Questions
Problem 1CQQ
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  1. Sanders Corp. is considering three mutually exclusive alternatives for one of their production facilities.

The cash flow details, which indicate the expected revenues for each possible capital investment (option) are shown in thousands of dollars in the table provided. 

Assuming a MARR rate of 11.0% per year and based on a rate of return analysis which (if any) of these alternatives should be implemented? 

What is the discounted payback period and annual worth of the preferred alternative (if any was selected).

 

Year 0 Option #1 Option #2 Option #3 $ (8.00) $ (13.90) $ (24.00) 1 $ 2.60 $ 4.05 $ 2 $ 2.60 $ 4.05 $ 3.00 3 3 69 $ 2.60 $ 4.05 $ 6.00 4 $ 2.60 $ 4.05 $ 9.00 5 69 $ 2.60 $ 4.05 $ 12.00 19 6 $ 2.60 $ 4.05 $ 15.00
Transcribed Image Text:Year 0 Option #1 Option #2 Option #3 $ (8.00) $ (13.90) $ (24.00) 1 $ 2.60 $ 4.05 $ 2 $ 2.60 $ 4.05 $ 3.00 3 3 69 $ 2.60 $ 4.05 $ 6.00 4 $ 2.60 $ 4.05 $ 9.00 5 69 $ 2.60 $ 4.05 $ 12.00 19 6 $ 2.60 $ 4.05 $ 15.00
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