Suppose the MARR is 12%. Use the following table to answer the question-Which option should be selected as the challenger alternative? CMS FMS nitial Investment $20,000 $29,000 Annual Revenue 6,688 9,102 Useful Life (Years)
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- Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of 150,000 and will operate for five years. The cash flows associated with these projects are as follows: Statens required rate of return is 10%. Using the net present value method and the present value table provided in Appendix A, which of the following actions would you recommend to Staten? a. Accept Project X and reject Project Y. b. Accept Project Y and reject Project X. c. Accept Projects X and Y. d. Reject Projects X and Y.Redbird Company is considering a project with an initial investment of $265,000 in new equipment that will yield annual net cash flows of $45,800 each year over its seven-year life. The companys minimum required rate of return is 8%. What is the internal rate of return? Should Redbird accept the project based on IRR?For the following table, assume a MARR of 15%per year and a useful life for each alternative of eightyears which equals the study period. The rank-orderof alternatives from least capital investment to greatestcapital investment is Z → Y → W → X. Completethe incremental analysis by selecting the preferredalternative. “Do nothing” is not an option. (6.4)FE PRACTICE PROBLEMS 307Z → Y Y → W W → X! Capital −$250 −$400 −$550investment! Annual cost 70 90 15savings! Market 100 50 200value! PW(15%) 97 20 ???(a) Alternative W (b) Alternative X(c) Alternative Y (d) Alternative ZThe following mutually exclusive investment alternatives have been presented to you.
- Project P has a cost of $1,000 and cash flows of $300 per year for3 years plus another $1,000 in Year 4. The project’s cost of capital is15%. What are P’s regular and discounted paybacks? (3.10, 3.55) Ifthe company requires a payback of 3 years or less, would the projectbe accepted? Would this be a good accept/reject decision, consideringthe NPV and/or the IRR? (NPV = $256.72, IRR =24.78%)Complete the following analysis of cost alternatives and select the preferred alternative. The study period is 10 years and the MARR=15%per year. "Do Nothing" is not an option. A B C D Capital investment $15,000 $15,900 $13,500 $18,000 Annual costs 240 310 450 90 Market value at EOY 10 900 1,250 1,750 2,000 FW (15%) −$64,656 −$69,369 ??? −$72,647 The FW of the alternative C is ... nothing.(Round to the nearest dollar.) Select the preferred alternative. Choose the correct answer below. A. Alternative D B. Alternative B C. Alternative C D. Alternative AThe following mutually exclusive investment alternatives have been presented to you. The life of all alternatives is 10 years. Use this information to solve, Using a MARR of 15%, the preferred Alternative is: (a) Do Nothing (b) Alternative A (c) Alternative B (d) Alternative C (e) Alternative D (f) Alternative E.
- Bausch Company is presented with the following two mutually exclusive projects. The required return for both projects is 20 percent. Year Project M Project N 0 –$139,000 –$356,000 1 63,600 152,000 2 81,600 181,000 3 72,600 137,000 4 58,600 111,000 a. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Which, if either, of the projects should the company accept?For the following table, assume a MARR of 15% per year and a useful life for each alternative of eight years which equals the study period. The rank-orderof alternatives from least capital investment to greatest capital investment is Z → Y → W → X. Complete the incremental analysis by selecting the preferred alternative. “Do nothing” is not an option. Solve, (a) Alternative W (b) Alternative X (c) Alternative Y (d) Alternative Z.Bausch Company is presented with the following two mutually exclusive projects. The required return for both projects is 20 percent. Year Project M Project N 0 -$142,000 -$363,000 1 64,300 148,500 2 82,300 188,000 3 73,300 133,500 4 59,300 118,000 a. What is the IRR for each project? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Which, if either, of the projects should the company accept? % a. Project M % Project N b. Project M Project N c. Accept project
- Consider the six indivisible investment alternatives shown below. The planning horizon is 8 years. The MARR is 15%. $60,000 is available for investment. a. Which investments should be made in order to maximize present worth? b. Solve part a when investments N and P are mutually exclusive and R is contingent on Q.Project P has a cost of $1,000 and cash flows of $300 per year for 3 years plus another$1,000 in Year 4. The project’s cost of capital is 15%. What are Project P’s regular anddiscounted paybacks? If the company requires a payback of 3 years orless, would the project be accepted? Would this be a good accept/reject decisionconsidering the NPV and/or the IRR?2. Your firm is considering the following 3 mutually exclusive alternatives. Interest rate is10%. A B CInitial Cost $35,000.00 $21,000.00 $42,000.00Annual Benefit $4,200.00 $3,300.00 $5,000.00Salvage value 0 $1,000 $1500Project life Forever 20 year 50 a. Calculate the Benefit-Cost ratio of each projectb. Which of the 3 alternatives should be selected using B/C ratio analysis (show yourwork)?
