Use the rate of return values of the equipment alternatives given in the following table to assist your manager to decide, if any, which one to purchase given that the MARR is 10%.

Expert Solution

It shall be noted that cash outflow and cash inflow of all these 4 alternatives and hence, their respective net cash inflows are as follows:

Cash Outflow is the Costs incurred in each alternative - First Cost and Annual Cost

Cash Inflow is the annual revenue that each alternative generates

Net Cash Inflow = Cash Inflow - Cash Outflow

Year	A1	A2	A3	A4
	Cash Outflow	Cash Inflow	Net Cash Inflow	Cash Outflow	Cash Inflow	Net Cash Inflow	Cash Outflow	Cash Inflow	Net Cash Inflow	Cash Outflow	Cash Inflow	Net Cash Inflow
0	80000		-80000	55000		-55000	150000		-150000	25000		-25000
1	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
2	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
3	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
4	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000

The rate of return for each alternative is the estimated internal rate of return that can be estimated using IRR() excel function over the net cash inflow of each alternative.

The result is:

Year	A1	A2	A3	A4
	Cash Outflow	Cash Inflow	Net Cash Inflow	Cash Outflow	Cash Inflow	Net Cash Inflow	Cash Outflow	Cash Inflow	Net Cash Inflow	Cash Outflow	Cash Inflow	Net Cash Inflow
0	80000		-80000	55000		-55000	150000		-150000	25000		-25000
1	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
2	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
3	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
4	30000	62000	32000	28000	46000	18000	18000	52000	34000	20000	30000	10000
	Internal Rate of Return	21.8622696%	Internal Rate of Return	11.72%	Internal Rate of Return	-3.81%	Internal Rate of Return	21.8622696%

Since MARR is 10%, Alternative A3 is ruled out as its IRR is -3.81%

Since, the IRR is the highest for both Alternative A1 and A4 at 21.8622696% so Alternative A1 or A4 could be suggested for purchase on the basis of rate of return values.

Rahul Sunny answered 2 years ago

Use the rate of return values of the equipment alternatives given in the following table to assist your manager to decide

Use the rate of return values of the equipment alternatives given in the following table to assist your manager to decide, if any, which one to purchase given that the MARR is 10%

If we are given the following investment opportunities, which is preferred at a MARR of 10%?...

If we are given the following investment opportunities, which is preferred at a MARR of 10%? Be sure to use both IRR and incremental analysis. Alternative Investment A Investment B Investment C Investment D Initial Investment $4,000 $15,000 $5,000 $19,000 Year 1 cash flow 0 0 0 0 Year 2 cash flow $9,500 $22,100 $4,100 $25,700

Suppose the MARR is 12%. Use the following table to answer the question--Which option should be...

Suppose the MARR is 12%. Use the following table to answer the question--Which option should be selected as the challenger alternative? CMS FMS Initial Investment $20,000 $29,000 Annual Revenue 6,688 9,102 Useful Life (Years) 5 5 A. CMS B. Both options are acceptable challenger alternatives. C. I'm completely lost! D. Neither option is acceptable as a challenger alternative. E. FMS

One of your responsibilities as a Warehouse Manager is to secure equipment for use in the...

One of your responsibilities as a Warehouse Manager is to secure equipment for use in the warehouse. Here is a list of equipment that is typically required in most modern warehouse operations today. Equipment: Stacking frame, Single deep pallet rack, Double deep pallet rack, 4 x 4 four way entry wood pallets, 4 x4 four way entry plastic pallets, Walkie stacker, Counterbalance lift truck (propane), Sideloader truck, Pallet jack, Automated Storage/Retrieval System, Order picker truck, 100 foot roller conveyor, 100...

Compare the following 2 alternatives using the incremental rate of return method. Determine which is the...

Compare the following 2 alternatives using the incremental rate of return method. Determine which is the most efficient and which is the most profitable. MARR=8% per year compounded yearly. (Note: For full credit, I want you to compute the actual IRR values) Alter. Construction cost Annual Benefits Salvage Life (yrs) A $1,250,000 $300,000 $12,500 12 B $750,000 $270,000 $10,000 7

Use the Table of Thermodynamic Data to decide which of the following reactions have K>1 at...

Use the Table of Thermodynamic Data to decide which of the following reactions have K>1 at 298 K: HCl(g)+NH3(g) <=> NH4Cl(s) 2 Al2O3(s) + 3 Si(s)<=>  3 SiO2(s) + 4 Al(s) Fe(s) + H2S(g) <=> FeS(s) + H2(g). Which of the products of these reactions are favored by a rise in temperature?

Assume that your required rate of return is eight percent and you are given the following...

Assume that your required rate of return is eight percent and you are given the following stream of cash flows: Year Cash Flow 1 $434 2 $696 3 $767 4 $646 5 $862 6 $397 If payments are made at the end of each period, what is the present value of the cash flow stream? Select one: a. $2,809.88 b. $2,668.92 c. $42,344.29 d. $34,434.92 e. $2,919.10

4) Assume that your required rate of return is 12 percent and you are given the following...

4) Assume that your required rate of return is 12 percent and you are given the following stream of cash flows: Year Cash Flow 0 $10,000 1 $15,000 2 $15,000 3 $15,000 4 $15,000 5 $20,000 If payments are made at the end of each period, what is the present value of the cash flow stream? A. $66,909 B. $57,323 C. $61,815 D. $52,345 show how to calculate it by financial calculator

1. In the DNA from any given organism, which one of the following is true? A....

1. In the DNA from any given organism, which one of the following is true? A. The molecular ratio of A:T is always 1 B. The molecular ratio of T:C is always 1 C. The molecular ratio of A:G is always 1 D. The molecular ratio of purine to pyrimidines is never 1 2. Regarding polysaccharides, which of the following is incorrect? Cellulose is the polysaccharide that provides structure to plants Glycogen is the polysaccharide that stores energy in plants...

Which one of the following stocks is correctly priced if the risk-free rate of return is...

Which one of the following stocks is correctly priced if the risk-free rate of return is 4.1 percent and the market risk premium is 8.6 percent? stock c stock b stock a stock d stock e Stock Beta Expected Return A .81 7.88 % B 1.57 12.69 C 1.38 11.35 D 1.37 11.99 E .95 12.27

Question