Question
In: Economics
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
Solutions
Expert Solution
Let's do some computations in teh table below
| Time | CF - CMS | PV - CMS = CF/1.12^Time | CF - FMS | PV - FMS = CF/1.12^Time | CF: FMS-CMS | PV = CF/1.12^time |
| 0 | -20,000.00 | -20,000.00 | -29,000.00 | -29,000.00 | -9,000.00 | -9,000.00 |
| 1 | 6,688.00 | 5,971.43 | 9,102.00 | 8,126.79 | 2,414.00 | 2,155.36 |
| 2 | 6,688.00 | 5,331.63 | 9,102.00 | 7,256.06 | 2,414.00 | 1,924.43 |
| 3 | 6,688.00 | 4,760.39 | 9,102.00 | 6,478.62 | 2,414.00 | 1,718.24 |
| 4 | 6,688.00 | 4,250.34 | 9,102.00 | 5,784.49 | 2,414.00 | 1,534.14 |
| 5 | 6,688.00 | 3,794.95 | 9,102.00 | 5,164.72 | 2,414.00 | 1,369.77 |
| Total | 4,108.74 | 3,810.67 | -298.07 |
We see that CMS and FMS both have a positive NPV. However, the incremental NPV that we get from investing more in FMS is negative over and above the investment we are making in CMS. Hence we should invest in CMS.
Rahul Sunny answered 1 year agoRelated Solutions
Suppose the MARR is 5%. Use the following table to answer the question--The IRR on the...
Suppose the MARR is 5%. Use the following table to answer the
question--The IRR on the CMS Investment is _______. CMS FMS Initial
Investment $31,000 $38,000 Annual Revenue 6,688 9,102 Useful Life
(Years) 5 5 A. 17.0% - 18.0% B. 5.0% - 6.0% C. 20.0% - 21.0% D.
2.0% - 3.0% E. 11.0% - 12.0%
Answer the following short questions. Use MARR = 12% and tax rate = 40% in all...
Answer the following short questions. Use MARR = 12% and tax
rate = 40% in all problems unless otherwise specified.
3. A young engineer calculated that monthly payments of $A are
required to pay off a $5000 loan for n years at i% interest,
compounded monthly. If the engineer decides to borrow $10,000
instead, her monthly payments are $2A. True or False
Dertermine which of the two following cash flows is preferable, using a MARR of 12%. You...
Dertermine which of the two following cash flows is preferable,
using a MARR of 12%. You can use any method you prefer and may
assume repeatability is an acceptable assumption. Option A requires
an initial investment of $35000 and produces for five years an
annual return of $9400. The salvage value at five years is expected
to be $5000. Option B requires an initial investment of $50000 and
produces an annual return for seven years of 10300. The salvage
value...
Dertermine which of the two following cash flows is preferable, using a MARR of 12%. You...
Dertermine which of the two following cash flows is preferable,
using a MARR of 12%. You can use any method you prefer and may
assume repeatability is an acceptable assumption. Option A requires
an initial investment of $35000 and produces for five years an
annual return of $9400. The salvage value at five years is expected
to be $5000. Option B requires an initial investment of $50000 and
produces an annual return for seven years of 10300. The salvage
value...
Use the information in the following table to answer the question. Note the fund started with...
Use the information in the following table to answer the
question. Note the fund started with 100 Net Asset Value
at the start of 2012. 2012 2013 2014 2015 2016 2017 2018
2019
Return 7.7% 10.4% 21.9% -2.2% 24.8% -20.5% 12.8% 7.7%
Asset Value 107.67 118.83 144.83 141.67 176.83 140.50 158.50
170.67
1)Given the above hedge fund manager’s performance, which
year(s) would the manager get paid on their high watermark?
2)Calculate the rolling 3 years' average returns and identify
which...
Use the information in the following table to answer the question. Note the fund started with...
Use the information in the following table to answer the
question.
Note the fund started with 100 Net Asset Value at the start
of 2012.
2012
2013
2014
2015
2016
2017
2018
2019
Return
8.0%
4.0%
1.7%
-4.5%
9.7%
10.7%
-0.3%
-14.1%
Asset Value
108.00
112.36
114.27
109.18
119.82
132.64
132.27
113.64
Given the above hedge fund manager’s performance, which year(s)
would the manager get paid on their high water mark? (1.5
marks).
Calculate the rolling 3 years average returns...
Use the data given below to answer the following question(s). The following table exhibits the age...
Use the data given below to answer the following question(s).
The following table exhibits the age of second-hand furniture and
the corresponding prices. Use the table to answer the following
question(s). (Hint: Use scatter diagram and XLMiner where
necessary.) Number of Years Values 2 1856 14 348 7 1020 5 1530 10
349 8 780 9 653 3 1830 10 750 6 1300 Q1. What is the relationship
between the age of the furniture and their values? _
_________________ Q2....
Question 12 options: Use the following information to answer the 8 questions (filling in the blanks)...
Question 12 options: Use the following information to answer the
8 questions (filling in the blanks) that follow it. When answering
the questions, DO NOT use dollar signs, USE commas to separate
thousands, DO NOT use parenthesis to denote negative numbers, USE
the negative sign and place it in front of first digit of your
answer when your answer is a negative number. Round to the nearest
dollar (do not enter decimals). For example, if your answer is
-$1,245,300.40 then...
1a. Use the table below to answer the following questions. Suppose there are 15.66 million people...
1a.
Use the table below to answer the following questions.
Suppose there are 15.66 million people employed in the
economy.
Percent of Labor Force
Cyclically Unemployed
2.62%
Frictionally Unemployed
3.09%
Structurally Unemployed
3.96%
Instructions: Round your answers two decimal
places.
What is the unemployment rate? %
What is the natural rate of unemployment? %
1b.
Suppose you have been given the following information from a
government and asked to compute the annual inflation rate.
Instructions: Round your answers to two decimal
places....
Use the following table to answer the question below. If you have the standard utility function...
Use the following table to answer the question below. If you
have the standard utility function described in the lecture with A
= 6, and you think the future will be like the 1926-1946 period,
what fraction of your investments should be in the T-bill
(i.e., the portfolio weight of T-bill)?
Round your answer to 4 decimal places. For example, if your
answer is 3.205%, then please write down 0.0321.
time
S&P500 ret.
T-bill ret.
Std. dev.
1926-2012
11.67%
3.58%...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Suppose country A has a central bank with full credibility, and country B has a central...
- Can you explain the major concepts needed to launch a satellite into space, place it in...
- If you were manager, what are some challenges you anticipate in computing the WACC? Do you...
- After reading the following case, please answer the following questions: 1. Why does agency problem arise?...
- Consider a series of 8 flips of a fair coin. Calculate the probabilities for obtaining 0-8...
- 1.Discuss the two methods how Eugenics have been applied in modern history. 2. Explain the ethical...
- Are patents or trademarks protected by common law? Do they require registration for enforcement?
ADVERTISEMENT