Alfredo Auto Parts is considering investing in a new forming line for grille assemblies. For a five-year study period, the cash flows for two separate designs are shown below. Create a spreadsheet that will calculate the present worths for each project for a variable ALARR. Through trial and error, establish the ALARR at which the present worths of the two projects are exactly the same. Cash Flows for Grille Assembly Project Automated Line Manual Line Disburse- Net Cash Disburse- Net Cash Year Receipts Flow Receipts Flow ments ments €1 500 000 € 0 -€1 500 000 €1 000 000 € 0-€1 000 000 1 50 000 300 000 250 000 20 000 200 000 180 000 60 000 300 000 240 000 25 000 200 000 175 000 3 70 000 300 000 230 000 30 000 200 000 170 000 4 80 000 300 000 220 000 35 000 200 000 165 000 90 000 800 000 710 000 40 000 200 000 160 000 2.
Alfredo Auto Parts is considering investing in a new forming line for grille assemblies. For a five-year study period, the cash flows for two separate designs are shown below. Create a spreadsheet that will calculate the present worths for each project for a variable ALARR. Through trial and error, establish the ALARR at which the present worths of the two projects are exactly the same. Cash Flows for Grille Assembly Project Automated Line Manual Line Disburse- Net Cash Disburse- Net Cash Year Receipts Flow Receipts Flow ments ments €1 500 000 € 0 -€1 500 000 €1 000 000 € 0-€1 000 000 1 50 000 300 000 250 000 20 000 200 000 180 000 60 000 300 000 240 000 25 000 200 000 175 000 3 70 000 300 000 230 000 30 000 200 000 170 000 4 80 000 300 000 220 000 35 000 200 000 165 000 90 000 800 000 710 000 40 000 200 000 160 000 2.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section10.A: Mutually Exclusive Investments Having Unequal Lives
Problem 1P
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Alfredo Auto Parts is considering investing in a new forming line for grille assemblies. For a five-year study period, the cash flows for two separate designs are shown below. Create a spreadsheet that will calculate the present worths for each project for a variable ALARR. Through trial and error, establish the ALARR at which the present worths of the two projects are exactly the same. Cash Flows for Grille Assembly Project Automated Line Manual Line Disburse- Net Cash | Disburse- Net Cash Year | ments | Receipts | Flow ments | Receipts Flow 0 [e1 500000 [€ 0 [-€1 500 000 [€1 000 000 | € o[ -€1 000 000 1 50 000 | 300 000 250000 [ 20000 [ 200 000 180 000 2 60 000 | 300 000 240000 [ 25000 [ 200 000 175 000 3 70 000 | 300 000 230 000 30 000 | 200 000 170 000 4 80000 [ 300 000 220 000 35000 | 200 000 165 000 5 90 000 [ 800 000 710000 40000 [ 200 000 160 000
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