Answered: Alternative Capital Investment Annual…

Business

Finance

Alternative Capital Investment Annual Expenses A $740,000 1,840,000 540,000 $361,940 183,810 B 420,000

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

A municipal police department has decided to acquire an unmanned drone
for aerial surveillance of a high-crime region of their city. Three mutually exclusive drones are being studied and their data are provided below. All alternatives are expected to have negligible market (salvage) values at the end of five years. The police department’s MARR is 8% per year. Which drone
should be selected?

Alternative Capital Investment Annual Expenses
A
$740,000
1,840,000
540,000
$361,940
183,810
B
420,000

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