Your business is considering the selection of hybrid trucks as an alternative to conventional gasoline powered trucks. Based on the following data, should the hybrid trucks be selected over conventional? Use incremental rate of return analysis. Hybrid $48,000 Conventional Up front cost Miles per gallon Cost of fuel Miles per year Life (years) Salvage Value MARR $40,000 12 18 $4.00/gal $4.00/gal 18,000 5 18,000 $20,000 $24,000 15% 15%

Your business is considering the selection of hybrid trucks as an alternative to conventional gasoline powered trucks. Based on the following data, should the hybrid trucks be selected over conventional? Use incremental rate of return analysis. Hybrid $48,000 Conventional Up front cost Miles per gallon Cost of fuel Miles per year Life (years) Salvage Value MARR $40,000 12 18 $4.00/gal $4.00/gal 18,000 5 18,000 $20,000 $24,000 15% 15%

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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Similar questions

In a few sentences, answer the following question as completely as you can. According to your textbook, “an investment should be accepted if the net present value is positive and rejected if it is negative” (p. 239). What does an NPV of zero mean?If you were a financial decision maker facing a project with NPV of zero (or close to zero) what would you do? Can you think of any other factors that might influence your decision?
Which of the following statements is true? I. Incremental analysis is an analytical approach that focuses only on those revenues and costs that will not change as a result of a decision. II. When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs. II. To estimate what the profit will be at various levels of sales volume, multiply the number of units to be sold above or below the break-even point by the unit contribution margin. Statements I and III are true. Statements II and III are true. All of the statements are true. None of the statements are true.
What would you recommend if the benefit / cost ratio is >1: Select one: a. The project must be accepted. b. Benefit / cost ratio cannot be >1 c. The project must be rejected. d. Benefit / cost ratio always =1
Please describe NPV, IRR and their relationship. How do you evaluate each for making an investment decision? That is, what is a favorable NPV and IRR for making an investment decision. If you were developing a capital budgeting process at your employer, how would you prioritize your projects? What is the NPV when IRR = WACC, IRR>WACC, and IRR<WACC? There is a duplex for sale in Absecon for $700,000 at this time. It has 2 units that generate a total of $25,000 in gross rent. The property taxes are $4,000, commercial property insurance is $2,000, flood insurance is $1,000, and annual maintenance is $2,000. You expect to sell it in one year at a price growth of 0%. What is the NPV with a WACC of 10%. Is the IRR greater or less than the WACC? Would you invest in this project and why?
Please answer part A thanks
Q.2.
Which of the following were listed as potential Problems or Issues associated with Using a Rate of Return Approach to justifying single or multiple Mutually Exclusive projects? Note: This is a Multiple Answer question. Please select all of the following options you think are correct? O The ROR calculations are typically more complex than the PW, AW, or FW methods and frequently require the use of trial and error techniques. O You cannot rely on the best Mutually Exclusive project to have the highest ROR. O An incremental approach is required to reliably determine the best project when comparing multiple Mutually Exclusive projects with the ROR approach. O This method assumes that any net positive cash flows are reinvested at the ROR rate. If the ROR rate is substantially larger than MARR, this might not be a realistic assumption. OFor any sequence of Net Cash Flows with more than one sign chance over the life of the project there may be more than one ROR value that satisfies the Rate…
Industry is evaluating two different manufacturing systems (Alpha and Beta): Possible Outcome Probability Rate of Return Alpha System Rate of Return Beta System Optimistic .35 .40 .15 Most likely .45 .25 .30 Pessimistic .20 (.10) (.20) Which manufacturing system provides the lowest expected return? why? Alpha System Beta System Not enough information
QUANTITATIVE. Fill in the following statements based on the below project financial analysis. a. The Net Present Value is b. The Return on Investment is c. The project will break even (make back its costs) in Year d. This project Created by: Praju Manageski Note: Change the inputs, such as discount rate, number of years, costs, and benefits. Be sure to Discount rate Costs Discount factor Discounted costs Benefits Discount factor Discounted benefits profitable because the ROI and NPV are both Financial Analysis for Project GGU Assume the project is completed in Year 0 Discounted benefits -costs Cumulative benefits - costs ROI 5% 10,000 1.00 10,000 0 1.00 0 (10,000) (10,000) 16% 0 0.95 2,000 0.95 1,905 Year 0 0.91 5000 0.91 4,535 1,905 4,535 (8,095) (3,560) 0 0.86 . 6000 0.86 5,183 5,183 1,623 10,000 11,623 1,623 NPV

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