Consider the cash flow diagram below of two alternatives using an interest rate of 8% and select the better oneusing the EUAC method.Alternative AAlternative BInitial Cost, $-15,000-20,000Annual M&O, $/year-6,000-9,000Refurbishment cost, $02,000Salvage Value, % of P2040Estimated Life, years412

EUAC is uniform equal annual cost that is equivalent to all cost that are going to occur during the…

Answered: Consider the cash flow diagram below of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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% PQRS 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
For the cash flows shown, use an annual worth comparison and an interest rate of 8% per year and detemine which service alternative should be selected. B Initial cost, $ 300000 680000 Annual cost, S/year S0000 30000 Annual cost started at year 4, S/year 15000 Extra cost every 6 years, $ 40000 Salvage value, $ 50000 150000 Life, Years 8. AW of alternative A is: AW of alternative B is: Which alternative will be selected?
For the cash flows given below, find the ERR and evaluate the project when the external reinvestment rate is ε = 10% and MARR = 8%. EOY 0 1 2 234 5 Cash Flow -$10,000 -$2,000 $2,500 $4,000 $4,000 $4,000
A project has the following cash flows set out below. What is the profitability index of this project if the relevant discount rate is 2 percent? Enter your final answer to two decimal places. Year Cash flow 0 -1,745 1 537 2 2,066 3 3,912
Based on the following, obtain the Incremental Cash Flow and determine the NPV (12% discount) for the project: \begin{tabular}{|l|r|r|r|r|r|r|} \hline & \multicolumn{6}{|c|}{ Year } \\ \hline & & 1 & 2 & 3 & 4 & 5 \\ \hline Investment i Show Transcribed Text $403.93 $280.28 $356.63 $179.41
gnment (II) Saved Fox Co. has identified an investment project with the following cash flows. Year Cash Flow $1,290 1,240 1,590 2. 3 1,950 a. If the discount rate is 9 percent, what is the present value of these cash flows? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value at 17 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the present value at 23 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value at 9 percent b. Present value at 17 percent C. Present value at 23 percent re to search
The cash flows for two mutually exclusive alternatives are as follow: A B - $500 - $600 -200 -300 500 150 400 300 300 450 Year 0 1 2 3 4 Each alternative has a 4-year useful life and no salvage value. The MARR is 12%. Which alternative should be selected based on: (a) Payback period (b) Benefit-cost ratio analysis (c) Rate of return analysis
Solo Corp. is evaluating a project with the following cash flows: Year Cash Flow 0. s29,200 11.400 14,100 16,000 13,100 2. 3. 4. 9,600 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects. a. Calculate the MIRR of the project using the discounting approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) b. Calculate the MIRR of the project using the reinvestment approach. (Do not round intermediate colculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. Calculate the MIRR of the project using the combination approach. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) % a. Discounting approach MIRR b. Reinvestment approach MIRR % C. Combination approach MIRR
Suppose you are offered a project with the following cash flows: Year Cash Flows 0 1 2 3 4 $8,800 -4,800 -3,500 -2,600 -1,400 a. What is the IRR of this offer? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) IRR % O Accept O Reject ☆ b. If the appropriate discount rate is 13 percent, should you accept this offer? c. If the appropriate discount rate is 25 percent, should you accept this offer?
The incremental cash flow present worth (PW) equation associated with two alternatives A and B is: 0 = -53,000+ 21,000(P/A, Ai*B-A,5) + 80000(P/F, Ai*B-A,5) Please provide the answers taking sign conventions into consideration. Determine the following: a) The first cost for B b) The M&O for A c) The salvage value of B Process Alternative A Alternative B First Cost, $ -30,000 ? M&O, $/Year ? -11,000 Salvage Value, $ 4,000 ? Life, Years 5 5
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 -24,063 -24,063 1 10,320 12,063 2 10,900 9,360 3 10,800 10,400 Sketch the NPV profiles for X and Y over a range of discount rates from zero to 25 percent (take 0%, 5%, 10%, 15%, 20%, 25%). Calculate the IRR of the projects. What is the relationship between NPV and IRR for your values? What is the crossover rate for these two projects and what it indicates for your values? Note - answer all the parts of the question.
Doak Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 -15,300 1 6,400 2 7,600 3 7,200 4 6,000 5 -3,400 The company uses an interest rate of 9 percent on all its projects. Calculate the MIRR of the project using all three methods. Discounting approach ____________% Reinvestment approach ___________% Combination approach ____________%

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