itten answer.) a) Assuming 9% minimum attractive rate of return (MARR), should either of the two projects be accepted? Why? b) Assuming 16% MARR, should either of the two projects be accepted? Why? c) For any positive value of the MARR, divide the possible MARR values into ranges with different decisions; describe and discuss what decision would be made in each range and why. You will need to calculate the crossover rate to determine the precise MARR where the decision changes. Include an NPV profile table and chart to illustrate your answer. Year 0 1 2 3 4 5 Cash Flow Cash Flow Project A Project B -450,000 -700,000 200,000 200,000 150,000 200,000 100,000 200,000 100,000 200,000 75,000 200,000
itten answer.) a) Assuming 9% minimum attractive rate of return (MARR), should either of the two projects be accepted? Why? b) Assuming 16% MARR, should either of the two projects be accepted? Why? c) For any positive value of the MARR, divide the possible MARR values into ranges with different decisions; describe and discuss what decision would be made in each range and why. You will need to calculate the crossover rate to determine the precise MARR where the decision changes. Include an NPV profile table and chart to illustrate your answer. Year 0 1 2 3 4 5 Cash Flow Cash Flow Project A Project B -450,000 -700,000 200,000 200,000 150,000 200,000 100,000 200,000 100,000 200,000 75,000 200,000
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 3E
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Transcribed Image Text:Consider the two mutually exclusive projects described in the table below. (Note: Each part of the question requires a
written answer.)
a) Assuming 9% minimum attractive rate of return (MARR), should either of the two projects be accepted?
Why?
b) Assuming 16% MARR, should either of the two projects be accepted? Why?
c)
For any positive value of the MARR, divide the possible MARR values into ranges with different decisions;
describe and discuss what decision would be made in each range and why. You will need to calculate the
crossover rate to determine the precise MARR where the decision changes. Include an NPV profile table and
chart to illustrate your answer.
Year
0
1
2
3
4
5
Cash Flow
Cash Flow
Project A
Project B
-450,000
-700,000
200,000
200,000
150,000
200,000
100,000
200,000
100,000
200,000
75,000 200,000
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