There are three alternatives with the following details: A B Investment cost ($) 50 150 110 Uniform annual benefit ($) 28.8 39.6 39.6 Useful life (years) 2 6 4 All alternatives have no salvage value. If the MARR value is 12%, Which alternative will be chosen if the problem is solved using the payback period?

There are three alternatives with the following details: A B Investment cost ($) 50 150 110 Uniform annual benefit ($) 28.8 39.6 39.6 Useful life (years) 2 6 4 All alternatives have no salvage value. If the MARR value is 12%, Which alternative will be chosen if the problem is solved using the payback period?

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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Two alternatives are being considered for installation. Which should be selected based on an interest rate of 5.6% per year ? Alternative A Alternative B First Cost, $ 135,000 462,000 Annual Operating Cost, $/yr 76,000 34,600 Salvage value, $ 71,200 n/a Life, years 9 ∞
You are given opportunity to purchase product for $42, 000. The product will have annual operating expenses of $4,000, and a salvage value of $20,000 at the end of its useful life of 6 years. Assuming a discount rate of 9.0%, what is the minimum acceptable revenue to justify taking this project? A 1.01% B $333 C $2704 D $767 E $10704
Pina Colada, Inc. is considering purchasing equipment costing $42000 with a 6-year useful life. The equipment will provide annual cost savings of $12000 and will be depreciated straight-line over its useful life with no salvage value. Pina Colada requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate net present value of this investment? A. $30000 B. $11832 C. $8772 D. $10260
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Davis Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate of return. Present Value of an Annuity of 1 Period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 What is the approximate net present value of this investment?
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Compare three alternatives on the basis of their capitalized costs at i = 13% per year and select the best alternative. Alternative E F G First Cost $-85,000 $-325,000 $-825,000 AOC, per Year $-65,000 $-20,000 $-6,000 Salvage Value $25,000 $75,000 $500,000 Life, Years 2 4 ∞ The capitalized cost of alternative E is $ , alternative F is $ , and alternative G is $ . The best alternative is E G F .
Compare the alternatives below on the basis of their capitalized costs with adjustments made for inflation. Use i =12% per year and f = 3% per year. Alternative X Y First cost, $ −18,500,000 −9,000,000 AOC, $ per year −25,000 −10,000 Salvage value, $ 105,000 82,000 Life, years ∞ 10
Two alternatives have been identified. Alternative A has a first cost of $10,000 and benefits of $3000 annually. Alternative B has a first cost of $12,000 and benefits of $3500 annually. The salvage values of each alternative are currently unknown. Using discounted payback period, which alternative is preferred at an interest rate of 10%?
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An untreated electric wooden pole that will last 15 years under a certain soilcondition costs P1500. If a treated pole will last for 25 years, what is themaximum justifiable amount that can be paid for the treated pol, if themaximum return on investment is 15%? Consider annual taxes and insuranceamount to 2% of first cost.

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