Question
In: Economics
Given the following 4 alternatives, the best alternative using the incremental ROR analysis at MARR= 13%...
Given the following 4 alternatives, the best alternative using the incremental ROR analysis at MARR= 13% is:
| Dealer | 1 | 2 | 3 | 4 |
| First Cost, $ | -5,000 | -6,500 | -10,000 | -15,000 |
| Annual Average Cost per repair, $ | -3500 | -3200 | -3000 | -2000 |
| Close-out value, $ | +500 | +900 | +700 | +1000 |
| Life, years | 8 | 8 | 8 | 8 |
Group of answer choices
Alt. 1
Alt. 2
Alt. 3
Alt. 4
Solutions
Expert Solution
Alternative 1 has the lowest initial investment therefore, consider it as base selection and alternative 2 has second lowest cost thus, calculating the incremental cash flow by subtracting cash flow of 1 from cash flow of 2.
The Incremental IRR is greater than MARR. Therefore, reject alternative 1 and accept alternative 2.
Now, compare alternative 2 and 3.
Reject alternative 3. Accept alternative 2.
Now compare alternative 2 and alternative 4.
Accept alternative 2.
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Rahul Sunny answered 1 year agoRelated Solutions
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Consider the following three alternatives. Using
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(A&B) will last for eight years. (2 points)
Do nothing
A
B
Capital investment
$0
$100
$130
Annual revenues
$0
$150
$130.78
Annual costs
$0
$123.62
$92
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Determine the best alternative among the options in the table below if the MARR is 6%....
Determine the best alternative among the options in the table
below if the MARR is 6%.
Option
A
B
C
Initial cost
$2500
$4000
$5000
Annual net benefits
$410
$639
$700
n= 20 years.
NPV=
IRR=
NPV
i
A
B
C
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
21%
22%
23%
24%
25%
a) Using Excel, construct a choice table for interest rates from 0%
to...
given the following data. use present worth analysis to find the best alternative, A, B, or...
given the following data.
use present worth analysis to find the best alternative, A, B,
or C.
Use an analysis period of 12 years and 15% interest.
A B C Initial cost $10,000 15,000 $12,000
Annual Benefit 6,000 10,000 5,000
Salvage benefit 1,000 -2,000 3,000
Useful life 2 years 3 years 4 years
* Use an analysis period of 12 years and 15% interest.
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given the following data. use present worth analysis to find the best alternative, A, B, or...
given the following data. use present worth analysis to find the
best alternative, A, B, or C. Use an analysis period of 12 years
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A B C
Initial cost $10,000 15,000 $12,000
Annual Benefit 6,000 10,000 5,000
Salvage benefir 1,000 -2,000 3,000
Useful life 2 years 3 years 4 years
* Use an analysis period of 12 years and 15% interest.
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Use an analysis period of 12 years and 15% interest.
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Initial cost $10,000 15,000 $12,000
Annual Benefit 6,000 10,000 5,000
Salvage benefit 1,000 -2,000 3,000
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Consider the investment projects given in Table P7.19. Assume that MARR = 13% in the following...
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(b) Which project(s) is(are) a mixed investment?
(c) Compute the IRR for each project.
(d) Determine the acceptability of each project.
Table P.719
n
Project 1
Project 2
Project 3
0
-$8,500
-$5,000
-$1,500
1
10,000
10,000
6,000
2
10,000
30,000
-6,000
3
0...
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Alt
Alt B
Alt C
Cost
$800
$300
$150
Uniform Annual Benefit
$142
$60
$33.50
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given MARR of 8%/year. First find if they are feasible and then
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Alt.
Construction cost $
Benefits
$/yr
Salvage $
Service Life (yrs)
A
510,000
145,000
10,000
5
B
775,000
155,000
15,000
9
C
1,075,000
165,000
20,000
11
Problem 5.73 Given the following data, use present worth analysis to find the best alternative, A,...
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Given the following data, use present worth analysis to find the
best alternative, A, B, or C.
Use an analysis period of 12 years and 15% interest.
Please show complete solution procedure, and include
cash flow diagram(s) for each machine.
Machine
A
B
C
Initial
cost
$10,000
$15,000
$12,000
Annual
benefit
$6,000
$10,000
$5,000
Salvage
value
$1,000
$-2,000
$3,000
Useful life
(yrs)
2
years 3
years
4 years
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