Question

Consider four mutually exclusive alternatives, each having an 8-year life: A. B. C. D. First cost:...

Consider four mutually exclusive alternatives, each having an 8-year life:
A. B. C. D.
First cost: $1000. $800. $600. $500
Uniform annual: 152. 120. 97. 122
Benefit
Salvage value: 750. 500. 500 0
If the minimum attractive rate of return is 12%, which alternative should be selected? Use the incremental analysis method
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Net Present Value calculation:

Project A B C D
First Cost 1000 800 600 500
Uniform Annual Benefit 152 120 97 122
Discounting Factor (PVAF(8y,12%) 4.968 4.968 4.968 4.968
Present Value of Cash flows 755 596 482 606
Salvage Value 750 500 500 0
Discounting Factor (PVF(8y,12%) 0.404 0.404 0.404 0.404
Present Value of Slavage Value 303 202 202 0
Present Value of total Cash Inflows 1058 798 684 606
Net Present Value 58 -2 84 106

Since, NPV of Project D is the highest, Poject D shoud be selected.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider three mutually exclusive alternatives. The MARR is 10%based on the payback period method, which alternative...
Consider three mutually exclusive alternatives. The MARR is 10%based on the payback period method, which alternative should be selected? Year             X           Y           Z 0                   -$100    -$50      -$50 1                   25          16          21 2                   25          16          21 3                   25          16          21 4                   25          16          21 Consider three mutually exclusive alternatives, each with a 20 year life span and no salvage value. The minimum attractive rate of return is 6%. A                         B                           C Initial Cost                                     $4000                 $8000                           $10,000 Uniform Annual Benefit ($)            410                    ...
A company is considering 3 mutually exclusive alternatives along with "Do-Nothing" as part of a new...
A company is considering 3 mutually exclusive alternatives along with "Do-Nothing" as part of a new quality improvement initiative. The alternatives are in the table below. For each alternative, the salvage value at the end of the useful life is zero. At the end of 10 years, Alternative Z can be replaced by another Z with identical costs and benefits. If the MARR is 6.5 %, and the analysis period is 20 years, which alternative should be selected? X Y...
The following data have been estimated for two mutually exclusive investment alternatives, A and B. Incremental...
The following data have been estimated for two mutually exclusive investment alternatives, A and B. Incremental ROR analysis was perform to select more desirable alternative. If MARR = 12%, the value of incremental cash flow for year 3 is: A B Capital Investment -8000 -13000 Annual Cash Flow -3500 -1600 Salvage Value 0 2,000 Useful life 5 5 -$1900 +$1900 -$3,500 +$3,500
hree mutually exclusive projects are being considered: A B C First cost $1000 $2000 $3000 Uniform...
hree mutually exclusive projects are being considered: A B C First cost $1000 $2000 $3000 Uniform annual benefit 250 350 525 Salvage value 200 300 400 Useful life (years) 5 6 7 Assume identical replacements. (b)If 8% is the desired rate of return, which project should be selected? NO EXCEL please
No Excel. Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200...
No Excel. Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the present. However, the pattern of revenue from them is different. Alternative A has the potential to bring more revenues later in the project life. The expected revenues of alternative A are: $350, $500, and $850 by the ends of years one to three, respectively. Alternative B promises more immediate cash inflow which is expected to diminish with time: $750, $300, and $100...
Compare two mutually exclusive alternatives below using annual worth analysis at MARR = 10% per year....
Compare two mutually exclusive alternatives below using annual worth analysis at MARR = 10% per year. Which alternative should be selected? Alternatives Alternative 1 Alternative 2 First cost, $ -90,000 -750,000 Annual cost, $/year -50,000 -10,000 Salvage value, $ 8,000 - Life, years 5 ∞ Alternative 2 and -$85,000 Alternative 1 and -$72,450 Alternative 2 and -$72,450 Alternative 1 and -$65,000
Consider the three mutually exclusive alternatives below. At the end of their useful lives, Alternatives X...
Consider the three mutually exclusive alternatives below. At the end of their useful lives, Alternatives X and Z will be replaced with identical replacements so that a 10-year service requirement is met. If the MARR is 3% per year, which alternative (if any) should be chosen based on the annual worth method? Alt X Alt Y Alt Z Capital investment $300,000 $425,000. $500,000. Annual savings $68,750 $108,750. $188,750. Salvage value $90,000 $125,000. $140,000. Life, years 10 20 5
You are evaluating 2 machines the investment of 2 mutually exclusive machines. Each machine has an...
You are evaluating 2 machines the investment of 2 mutually exclusive machines. Each machine has an eight year life and you plan to keep whichever machine you pick for the full 8 years. The firm's MARR is 10%. The cash flows for each machine are summarized in the following table: A B Initial Cost $4000 $3000 Annual Benefit $800 $600 Annual Cost $100 $50 Salvage Value $1500 $1000 Each investment has an IRR greater than the 10% MARR. Using Incremental...
You are evaluating 2 machines the investment of 2 mutually exclusive machines. Each machine has an...
You are evaluating 2 machines the investment of 2 mutually exclusive machines. Each machine has an eight year life and you plan to keep whichever machine you pick for the full 8 years. The firm's MARR is 10%. The cash flows for each machine are summarized in the following table: A B Initial Cost $4000 $3000 Annual Benefit $800 $600 Annual Cost $100 $50 Salvage Value $1500 $1000 Each investment has an IRR greater than the 10% MARR. Using Incremental...
You are evaluating 2 machines the investment of 2 mutually exclusive machines. Each machine has an...
You are evaluating 2 machines the investment of 2 mutually exclusive machines. Each machine has an eight year life and you plan to keep whichever machine you pick for the full 8 years. The firm's MARR is 10%. The cash flows for each machine are summarized in the following table: A B Initial Cost $4000 $3000 Annual Benefit $800 $600 Annual Cost $100 $50 Salvage Value $1500 $1000 Each investment has an IRR greater than the 10% MARR. Using Incremental...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT