Alternative Design Al Senting Capacity Annual Costs Annuul Benefits Required Investment 3,000 $194,000 $87,500 $800,000 A2 4,000 $224,000 $105,000 $1,000,000
Alternative Design Al Senting Capacity Annual Costs Annuul Benefits Required Investment 3,000 $194,000 $87,500 $800,000 A2 4,000 $224,000 $105,000 $1,000,000
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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Question
Auburn Recreation and Parks Department is considering two mutually exclusive proposals for a new softball complex on a city-owned lot.
The complex will be useful for 30 years and has no appreciable salvage value (regardless of seating capacity). Assuming an 8% discount rate, which of the following statements is incorrect?
(a) Select A1 because it has the largest B/C ratio.
(b) Select A1 because it has the most benefits per seating capacity.
(c) Select A1 because it has the largest PW.
(d) Select A1 because the incremental benefits generated from A2 are not large enough to offset the additional investment ($200,000 more than A1 ).
Transcribed Image Text:Alternative
Design
Al
Senting
Capacity
Annual
Costs
Annuul
Benefits
Required
Investment
3,000
$194,000
$87,500
$800,000
A2
4,000
$224,000
$105,000
$1,000,000
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