Question
In: Economics
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the...
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the present. However, the pattern of revenue from them is different. Alternative A has the potential to bring more revenues later in the project life. The expected revenues of alternative A are: $350, $500, and $850 by the ends of years one to three, respectively. Alternative B promises more immediate cash inflow which is expected to diminish with time: $750, $300, and $100 by the ends of years one to three, respectively. Use MARR=8%.
a) Calculate the Internal Rate of Return of each alternative.
b) Which alternatives are feasible?
c) Calculate the Net Present Worth of each alternative and compare them.
Solutions
Thank
you
Rahul Sunny answered 7 months agoRelated Solutions
Two mutually exclusive alternatives are bring considered: A and B. Both alternatives cost $1,200 at the...
Two mutually exclusive alternatives are bring considered: A and
B. Both alternatives cost $1,200 at the present. However, the
pattern of revenue from them is different. Alternative A has the
potential to bring more revenues later in the project life. The
expected revenues of alternative A are: $350, $500, and $850 by the
ends of years one to three, respectively. Alternative B promises
more immediate cash inflow which is expected to diminish with time:
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$ 2000
$ 1000
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$1500
$ 1500
3
$1500
$ 2000
4
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Given the following time events and incremental cash flow, if
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Project
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Year
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Year
0:
($80,000)
Year
1:
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Year
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Year
2:
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Projects A and B, both of equal risk, are mutually exclusive alternatives for expanding Corporation’s capacity....
Projects A and B, both of equal risk, are mutually exclusive
alternatives for expanding Corporation’s capacity. The firm’s
cost of capital is 13%. The cash flows for each project are shown
in the following table.
Project
A Project
B
Year
0:
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Year
0:
($80,000)
Year
1:
$15,000
Year
1:
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Year
2:
$20,000
Year
2:
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Data for two mutually exclusive alternatives are given below. Alternative A Alternative B Initial Cost $4,000...
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Alternative A
Alternative B
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$3,000
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$1,000
$600
Annual Costs (beginning at the end of year 1)
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$100
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$0
Useful Life (years)
5
10
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