You are the President of AMT Enterprises. You have the opportunity to expand your product line to include a new semi-conductor wafer fabrication line. In order to produce the new wafer, you must invest in a new production process. In addition to doing nothing (DN), two mutually exclusive processes are currently available to produce the wafer. Should you produce this new wafer? In other words, which, if either of the alternative processes should be chosen? Note: IRR for Alternative I= 15.7%, and IRR for Alternative II 19.2%. Assume that the capital investment for each alternative occurs at year 0 and that the annual revenues and expenses first occur at the end of year 1. Use the incremental IRR method to justify your decision. Your company's MARR is 15%. Click the icon to view the alternatives description. Which alternative would you choose as a base one? Choose the correct answer below. OA. Alternative I OB. Do nothing C. Alternative II Analyze the difference between the base alternative and the second-choice alternative. IRR A =%. (Round to one decimal place.) Analyze the difference between the current base alternative and the third-choice alternative IRR A %. (Round to one decimal places.) Which alternative should be selected? Choose the correct answer below. OA. Alternative I OB. Alternative II More Infe Capital Investment Annual Revenues Annual Expenses $22,000 $29,000 $7,000 $10,500 $2,500 $3,000 in year one, increasing $250 each year Useful life 10 thereafter 10 Print Done - X
You are the President of AMT Enterprises. You have the opportunity to expand your product line to include a new semi-conductor wafer fabrication line. In order to produce the new wafer, you must invest in a new production process. In addition to doing nothing (DN), two mutually exclusive processes are currently available to produce the wafer. Should you produce this new wafer? In other words, which, if either of the alternative processes should be chosen? Note: IRR for Alternative I= 15.7%, and IRR for Alternative II 19.2%. Assume that the capital investment for each alternative occurs at year 0 and that the annual revenues and expenses first occur at the end of year 1. Use the incremental IRR method to justify your decision. Your company's MARR is 15%. Click the icon to view the alternatives description. Which alternative would you choose as a base one? Choose the correct answer below. OA. Alternative I OB. Do nothing C. Alternative II Analyze the difference between the base alternative and the second-choice alternative. IRR A =%. (Round to one decimal place.) Analyze the difference between the current base alternative and the third-choice alternative IRR A %. (Round to one decimal places.) Which alternative should be selected? Choose the correct answer below. OA. Alternative I OB. Alternative II More Infe Capital Investment Annual Revenues Annual Expenses $22,000 $29,000 $7,000 $10,500 $2,500 $3,000 in year one, increasing $250 each year Useful life 10 thereafter 10 Print Done - X
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Transcribed Image Text:You are the President of AMT Enterprises. You have the opportunity to expand your product line to include a new semi-conductor wafer fabrication line. In order to produce the new wafer, you must invest in a new production
process. In addition to doing nothing (DN), two mutually exclusive processes are currently available to produce the wafer. Should you produce this new wafer? In other words, which, if either of the alternative processes
should be chosen? Note: IRR for Alternative I= 15.7%, and IRR for Alternative II 19.2%. Assume that the capital investment for each alternative occurs at year 0 and that the annual revenues and expenses first occur at the
end of year 1. Use the incremental IRR method to justify your decision. Your company's MARR is 15%.
Click the icon to view the alternatives description.
Which alternative would you choose as a base one? Choose the correct answer below.
OA. Alternative I
OB. Do nothing
C. Alternative II
Analyze the difference between the base alternative and the second-choice alternative.
IRR A
=%. (Round to one decimal place.)
Analyze the difference between the current base alternative and the third-choice alternative
IRR A
%. (Round to one decimal places.)
Which alternative should be selected? Choose the correct answer below.
OA. Alternative I
OB. Alternative II
More Infe
Capital Investment
Annual Revenues
Annual Expenses
$22,000
$29,000
$7,000
$10,500
$2,500
$3,000 in
year one,
increasing $250
each year
Useful life
10
thereafter
10
Print
Done
- X
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