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Proposal A, Required Investment After Tax Savings Rafe of Return A1 $60,000 $22,000 34.8% A2 $100,000 $28,200 25.2% A3 $110,000 $32,600 26.9% A4 $120,000 $33,600 25.0% As $140,000 $38.400 24.3% A6 $150,000 $42,200 25.1% Incremental Investment Incremental Rate of Return A2 - A, 8.9% Az - A2 42.7% A4 - A3 0.0% As - A4 20.2% A6 - As 36.3%

Proposal A, Required Investment After Tax Savings Rafe of Return A1 $60,000 $22,000 34.8% A2 $100,000 $28,200 25.2% A3 $110,000 $32,600 26.9% A4 $120,000 $33,600 25.0% As $140,000 $38.400 24.3% A6 $150,000 $42,200 25.1% Incremental Investment Incremental Rate of Return A2 - A, 8.9% Az - A2 42.7% A4 - A3 0.0% As - A4 20.2% A6 - As 36.3%

Essentials Of Investments
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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An electronic circuit board manufacturer is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing plant. All have lives of 10 years and zero salvage value. The required investment, the estimated after-tax reduction in annual disbursements, and the gross rate of return arc given for each alternative in the following table:

llte rate of return on incremental investments is given for each project as follows:

Which project would you select according to the rate of return on incremental investment if it is stated that the MARR is 15%?

Proposal A, Required Investment After Tax Savings Rafe of Return A1 $60,000 $22,000 34.8% A2 $100,000 $28,200 25.2% A3 $110,000 $32,600 26.9% A4 $120,000 $33,600 25.0% As $140,000 $38.400 24.3% A6 $150,000 $42,200 25.1% Incremental Investment Incremental Rate of Return A2 - A, 8.9% Az - A2 42.7% A4 - A3 0.0% As - A4 20.2% A6 - As 36.3%
Transcribed Image Text:Proposal A, Required Investment After Tax Savings Rafe of Return A1 $60,000 $22,000 34.8% A2 $100,000 $28,200 25.2% A3 $110,000 $32,600 26.9% A4 $120,000 $33,600 25.0% As $140,000 $38.400 24.3% A6 $150,000 $42,200 25.1% Incremental Investment Incremental Rate of Return A2 - A, 8.9% Az - A2 42.7% A4 - A3 0.0% As - A4 20.2% A6 - As 36.3%
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