Consider the mutually exclusive alternatives given in the table below. MARR is 5 % per year....

Consider the mutually exclusive alternatives given in the table below. MARR is 5 % per year. Assuming repeatability, what is the equivalent annual worth of the most profitable alternative? (Do not enter the dollar sign $ with your answer.)

_____________________________________________________________

X Y Z

_____________________________________________________________

Capital investment $50,000 $25,000 $40,000

Annual savings $15,000 $8,000 $12,000

Useful life (years) 10 15 20

_____________________________________________________________________________

Expert Solution

Alternatives	Year	Annual Savings	PV@ 5%	Disc. Savings

X	1 to 10	15,000	7.7217	1,15,825.50
		Disc. Cash inflows =		1,15,825.50
		Initial investment =		50,000.00
			NPV =	65,825.50
		EAW =	NPV/PVAF = 65,826/7.7217
		EAW =		8,525.00
Y	1 to 15	8,000	10.3796	83036.8
		Disc. Cash inflows =		83036.8
		Initial investment =		25,000
			NPV =	58,037
		EAW =	NPV/PVAF = 58,037/10.3796
		EAW =		5,591
Z	1 to 20	12,000	12.4622	149546.4
		Disc. Cash inflows =		149546.4
		Initial investment =		40,000
			NPV =	1,09,546
		EAW =	NPV/PVAF = 1,09,546/12.4622
		EAW =		8,790


Since Equivalent annual worth(EAW) of alternative Z is higher, it is most profitable

jeff jeffy answered 10 months ago

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...

The cash flows for four mutually exclusive alternatives are provided in the table below. If the...

The cash flows for four mutually exclusive alternatives are provided in the table below. If the useful life is 10 years for each alternative, find the best alternative using incremental rate of return analysis. MARR = 10% P Q R S Initial Cost 19,000 16,000 11,000 8,500 EUAB 3,500 3,100 2,200 1,350 A. Alt. S B. Alt. P C. Alt. Q D. Alt. R

5-38 Consider the two mutually exclusive projects in the table below. Salvage values represent the net...

5-38 Consider the two mutually exclusive projects in the table below. Salvage values represent the net proceeds (after tax) from disposal of the assets if they are sold at the end of each year. Both projects B1 and B2 will be available (or can be repeated) with the same costs and salvage values for an indefinite period. B1 B2 n Cash Flow Salvage Value Cash Flow Salvage Value 0 −$15,000 — −$30,000 — 1 −2,500 7,500 −2,700 6,500 2 −2,500...

Q3- For two mutually exclusive projects, the cash flows are given. If MARR is 10%, which...

Q3- For two mutually exclusive projects, the cash flows are given. If MARR is 10%, which project should we select? please show all steps and all work N(year) P1 P2 0 -$3000 -$12000 1 $1350 4200 2 1800 6225 3 1500 6330

Two mutually exclusive proposals, each with a life of 5 years, are under consideration. MARR is...

Two mutually exclusive proposals, each with a life of 5 years, are under consideration. MARR is 12%. Each proposal has the following cash flow profile: EOY NCF(A) NCF(B) 0 -$30,000 -$42,000 1 $9,300 $12,625 2 $9,300 $12,625 3 $9,300 $12,625 4 $9,300 $12,625 5 $9,300 $12,625 Determine which alternative the decsion maker should select using the internal rate of return method. Note: Need to use uncremental IRR analysis to calculate exact IRR Please give the written answer, not the excel...

Consider three mutually exclusive alternatives, each with a 20 year life span and no salvage value....

Consider three mutually exclusive alternatives, each with a 20 year life span and no salvage value. The minimum attractive rate of return is 6%. A B C Initial Cost $4000 $8000 $10,000 Uniform Annual Benefit ($) 410 639 700 Find the preferred alternative based on an analysis of your choice. Also estimate the sensitivity of this alternative to changes in the cost and benefit structure A firm is considering three mutually exclusive alternatives as part of a production improvement program....

Data for two mutually exclusive alternatives are given below. Alternative A Alternative B Initial Cost $4,000...

Data for two mutually exclusive alternatives are given below. Alternative A Alternative B Initial Cost $4,000 $3,000 Annual Benefits (beginning at the end of year 1) $1,000 $600 Annual Costs (beginning at the end of year 1) $300 $100 Salvage Value $500 $0 Useful Life (years) 5 10 Compute the net present worth for each alternative and choose the better alternative. MARR = 6% A. None can be chosen B. Alternative A C. Alternative B D. Any alternative can be...

A company has the following mutually exclusive investment alternatives. The cash flows are shown below. Year...

A company has the following mutually exclusive investment alternatives. The cash flows are shown below. Year Project A Project B 0 -$1,000 -$1,000 1 600 300 2 600 600 3 600 900 If the cost of capital is 10%, which investment(s) should the company select? Both Project A and Project B Project B with a NPV of $444.78 Project B with a NPV of $276.31 Project A with a NPV of $493.11 Project A with a NPV of $253.64

Q.5. Following table shows the EOY cash flows for two mutually exclusive alternatives (one must be...

Q.5. Following table shows the EOY cash flows for two mutually exclusive alternatives (one must be chosen). The alternatives represent all-in-one (AIO) printers for office use applications. AIO Printer A AIO Printer B Capital investment, $ 6,000 10,000 Annual operating expenses, $ 1,500 1,200 Market value, $ 1,000 1,500 Useful life, years 5 7 The MARR is 15% per year. Determine (using FW method) which alternative should be selected if the analysis period is 7 years, the repeatability assumption does...

Using the cash flows given in the table below for mutually exclusive projects Alpha and Beta,...

Using the cash flows given in the table below for mutually exclusive projects Alpha and Beta, assist the Chief Financial Officer in finding the breakeven rate (the crossover point or the rate of indifference). Which project do you recommend if using a cost of capital of 9% and Why? YEAR PROJECT ALPHA PROJECT BETA 0 -175 000 -82 500 1 40 000 30 000 2 60 000 10 500 3 85 000 40 000 4 92 000 75 000 5...

Question