Tennessee Tool Works (TTW) is considering investment in five independent projects, Any profitable combination of them is feasible. TTW has$50million available to invest, and these funds are currently earning 7% interest annually from municipal bonds. If the funds available are limited to $50 million, what is TTW’s MARR that is implied by this particular situation? ( 5.2 )

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Engineering Economy (16th Edition)...

16th Edition
William G. Sullivan + 2 others
Publisher: PEARSON
ISBN: 9780133439274
BuyFind

Engineering Economy (16th Edition)...

16th Edition
William G. Sullivan + 2 others
Publisher: PEARSON
ISBN: 9780133439274

Solutions

Chapter 5, Problem 1P
Textbook Problem

Tennessee Tool Works (TTW) is considering investment in five independent projects,

Any profitable combination of them is feasible.

Chapter 5, Problem 1P, Tennessee Tool Works (TTW) is considering investment in five independent projects, Any profitable

TTW has$50million available to invest, and these funds are currently earning 7% interest annually from municipal bonds. If the funds available are limited to $50 million, what is TTW’s MARR that is implied by this particular situation? (5.2)

Expert Solution
To determine

Selection of the project.

Explanation of Solution

The firm has limited investment. It can select the project that give more profit rate in order to maximize the profit. Thus, the firm can select the project A, E and D. The MARR for the firm is equal the best return of the rejected projects. Since the best return from the rejected project is 12%, the firm’s MARR is 12%.

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