Question
In: Economics
Using the incremental B/C method for comparing mutually exclusive alternatives always results in the same economically...
Using the incremental B/C method for comparing mutually exclusive alternatives always results in the same economically preferred alternatives as using the PW method.
True/False
When selecting projects based on the payback period method, a project with a shorter payback period is generally preferred.
True/False
One of the shortcomings of using the discounted payback period to select alternatives is that
a)it ignores all the cash flows beyond the payback period
b)it gives more weight to the cash flows beyond the payback period
c)it does not take into account the interest rate
A project with a higher net PW than a competing project of the same service life will also always have a higher B/C ratio.
True/False
When comparing mutually exclusive alternatives with the same service lives, the alternative with the highest B/C ratio is always the most economical.
True/False
Given the following information for a project: initial capital cost = $240,000; annual revenues = $60,000 and annual costs = $20,000; its simple payback period is most nearly equal to
6years
12years
4years
3years
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
Given the financial data for four mutually exclusive alternatives in the table below, A B C...
Given the financial data for four mutually exclusive
alternatives in the table below,
A
B
C
D
First cost
$18,000
$40,000
$21,200
45,000
O &M Cost/ year
2,600
5,000
3,900
11,000
Benefit/year
7,500
16,000
11,500
25,000
Salvage value
2,000
6,000
6,000
12,000
Life in years
4
Use a Rate of Return Analysis to solve for the following:
Which alternative should be chosen using an MARR of 9%?
Mathematical solution
Create a choice table from 0 – 25%.
Create a...
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...
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...
Consider the following three mutually exclusive investment project alternatives (A, B, C). Use the annual worth...
Consider the following three mutually exclusive investment
project alternatives (A, B, C). Use the annual worth
analysis (AW) to determine the best investment alternative
assuming MARR=15%.
Project
name:
A
B
C
Cash Flow (Year
0):
-200,000
-300,000 -400,000
Cash Flow (Year
1-N)
+150,000
+180,000 +150,000
Salvage value at year
N:
+30,000
+50,000
+60,000
Project Life
(N):
2 years
3 years
6 years
10. Two mutually exclusive events having positive probabilities are ______________ dependent. A. Always B. Sometimes C....
10. Two mutually exclusive events having positive probabilities
are ______________ dependent.
A. Always
B. Sometimes
C. Never
11. If two events are independent, we can _____ their probabilities
to determine the probability of Intersection.
A. Divide
B. Add
C. Multiply
D. Subtract
12. Events that have no sample space outcomes in common and
therefore, cannot occur simultaneously are:
A. Independent
B. Mutually Exclusive
C. Intersections
D. Unions
You are comparing two mutually exclusive alternatives where only cost information is available. Indicate which of...
You are comparing two mutually exclusive alternatives
where only cost information is available. Indicate which of the
following subsections is false if we make a present value analysis
of the investment increase (incremental analysis) at a given
interest, MARR. Remember that the assumption inherent in this type
of analysis is that the benefits will be the same regardless of the
alternative selected.
Select one:
a. If the PW is less than zero, we select the alternative with the
lowest initial...
The following two investment alternatives are being evaluated using the B/C ratio method. The alternatives have...
The following two investment alternatives are being evaluated
using the B/C ratio method. The alternatives have a 5-year
service life and the MARR is 18% per year.
Alternative
A
Alternative
B
Capital investment
$10,900
$16,000
Annual revenues
4,000
7,500
Annual costs
250
900
Market value at EOY 5
5,000
9,200
Click the icon to view the interest and annuity table for
discrete compounding when i equals=18%per year.
Calculate the modified B/C ratio of Alternative A
A.
1.32
B.1.35
C.1.26
D.0.90...
A manufacturing company is considering two mutually exclusive alternatives. Alternatives &nb
A manufacturing company is considering two mutually
exclusive alternatives.
Alternatives
Alt. A Alt. B
Initial
cost
$ 42,500 $ 70,000
Annual costs
O &
M
$ 6,000 $ 4,000
Annual savings $
18,500 $ 20,000
Residual value $
12,000 $ 25,000
Shelf
life
3 years 6 years
What would be the "advantage" in annual terms of
Alternative B versus Alternative A at 15% interest?
Select one:
a. $ 3020
b. $ 3500
c. $ 7436
d. Alternative B does...
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
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:
($80,000)
Year
0:
($80,000)
Year
1:
$15,000
Year
1:
$15,000
Year
2:
$20,000
Year
2:
$15,000
Year
3:
$25,000
Year
3:
$15,000
Year
4:
$30,000
Year
4:
$35,000
Year
5:
$30,000 ...
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