Considering the alternatives shown in the table below, perform an incremental ROR analysis and select the best economic choice. Consider a MARR of 11%.
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- Would love some help on how to approach this - thanks! The cash flows for three different alternatives are given in table below. MARR =10%. Alt. A Alt. B Alt. C Initial cost $5,000 9,000 7,500 Annual benefits $1,457 2,518 2,133 RoR 14% 13% 12.4% Life in years 5 1. ΔRoR for the first increment (Alt. C-Alt. A) is ___________________. A.10.12% B. 9.38% C. 11.85% D. 11.00% 2. ΔRoR for the second increment is ___________________. A. 10.12% B. 9.38% C. 8.94% D. 9.87% 3. The best alternative for a MARR of 10% using the incremental rate of return analysis is ____________. A. Alt. C B. Alt. A C. Alt. B D. Do nothingThe cash flows for three mutually exclusive alternatives are given in table below. MARR = 4%. ALB Alt. C 27,000 24,000 7,600 6,500 13% 11% Initial cost Annual benefits ROR Life in years Alt. A $15,000 $4,500 15% 5 Reference: Case Study 8 The best alternative for a MARR of 2.0% using the incremental rate of return analysis is A. Alt. C B. Alt. B C. Alt. A OD.Do-nothingIf the interest rate, i=10%, the capitalized cost (CC) of the given project whose Cash Flow diagram is given below is closest to: 0 PO=$800,000 1 2 $200,000 (Nonrecurring) 3 F--- -% per year 4 5 A= $5,000 6 7 8 Year $1025890 O $1030560 $1038450 $1027273 $2027372 O
- A project is being planned that has an initial investment at time 0, annual revenuesand expenses, and a salvage value at the end of the project lifespan (20 years). The financialvalues are summarized below:Initial investment amount at time 0 $150,000Estimated annual revenue $34,500 per yearEstimated annual expenses $8,700 per yearEstimated salvage value at end of lifespan $10,000Minimum attractive rate of return (MARR) 15%a. Calculate the capital recovery amount CR(i%).b. Using the annual worth (AW) method, determine whether purchasing the equipmentis economically justified.c. Repeat part (a) using the internal rate of return (IRR) method based on annual worth(AW).d. Using the present worth (PW) method, determine the break-even time period afterwhich purchase of the equipment generates a profit. (Find N when PW = 0) year period.Required information The tabulation of the incremental cash flows between alternatives A and B is shown. Alternative A has a 3-year life and alternative B a 6-year life. Year Incremental Cash Flows (BA), $ -22,500 5,000 5,000 11,000 5,000 5,000 5,000 NOTE: This is a multi-part question. Once an answer is submitted, you will be unable to return to this part. 0123456 If neither alternative has a salvage value, what is the first cost of alternative A? The first cost of alternative A is $-Q15. For the cash flows shown, determine the incremental cash flow between machines B and A (a) in year 0, (b) in year 3, and (c) in year 6. Machine First Cost, $ A B -13,000 -25,000 AOC, $ per Year -1,300-400 Life, Years Salvage Value, $ 5,000 6,000 3 6 a) The incremental cash flow between machines B and A in year 0 is $ . b) The incremental cash flow between machines B and A in year 3 is $. c) The incremental cash flow between machines B and A in year 6 is $ .
- Example A company is considering two types of equipment for its manufacturing plant. Pertinent data are as follows: Freeze Type A Type B First cost P200,000 P300,000 Annual Operating Cost P32,000 P24,000 D Annual Labor Cost P50,000 P32,000 Insurance and Property Taxes 3% 3% Payroll Taxes 4% 4% Estimated Life TO 10 If the minimum required rate of return is 15%, which equipment should be selected?Most likely estimates for a project are as follows. MARR Useful life Initial investment Receipts - Expenses (R-E) Click the icon to view the relationship between the PW and the percent change in parameter. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12per year. (a) Determine whether the statement "An initial investment of $7,150 keeps the investment economical." is true or false. True False (b) To which variable is the PW most sensitive to? OA. Usefule life B. Receipts Expenses 12% per year 14 years $5,500 $1,000/year OC. Initial InvestmentIf a company purchases an equipment for $P and uses it for N years, and the compaany's MARR is i%, what is the EUAC of the Capital Recovery? Group of answer choices $A(F/A, i%, N) $P(F/P, i%, N) %A(P/A, i%, N) $P(A/P, i%, N)
- A bond with a face value of $1000 can be purchased for $800. The bond matures in 5 years and the dividend rate is 6%/yr. with dividends paid semi-annually. What is the effective interest rate on the bond purchase? Only typed AnswerConsider two air-conditioning systems with the cash flow estimates as given below. Use AW analysis to determine the sensitivity of the economic decision to MARR values of 4%, 6%, and 8% per year. Air-Conditioning System 1 System First cost, $ AOC. $ per year Salvage valué, $ New compressor and motor cost at midlife, $ Life, years -9,000 -850 -100 Proy -2,200 8 The annual worth of air-conditioning system 1 when the MARR is 4% is $ The annual worth of air-conditioning system 2 when the MARR is 4% is $ The annual worth of air-conditioning system 1 when the MARR is 6% is $ The annual worth of air-conditioning system 2 when the MARR is 6% is $ 10 www Air-Conditioning System 2 -13,000 -105 -300 -3,140 12Q#1. Complete the analysis based on IRR and ERR methods separately to identify if the given project is a good investment or not. The MARR is 10% potential cost and revenue data are as follow. Also draw the cash flow diagram. Project A $19000 $500 Investment Cost Annual Operation Cost Annual Revenue $3500 Salvage Value Useful Life $3000 10 Years (Also draw the cash flow diagram).