11) Four mutually exclusive projects (A, B, C, and D) are being compared. Projec
ID: 1094060 • Letter: 1
Question
11) Four mutually exclusive projects (A, B, C, and D) are being compared. Project D requires the highest initial investment, followed by C, and then B. Project A is the do-nothing alternative. Incremental rates of return shown in the table have been computed. If the MARR is 16%, which alternative should be selected?
Incremental Investment
Incremental Rate of Return
B-A
20%
C-B
20%
C-A
24%
D-C
5%
D-B
13%
a. Not enough information to determine
b. Project B
c. Project C
d. Project D
12) You plan to invest $4,000 at the end of this year and increase your investment amount by 4% each year after that for 30 years. Assuming that you earn 6% APR on your money, how much would your last investment payment be?
a. $21,673
b. $22,974
c. $12,475
d. $12,874
13) A new machine was purchased for $10,000 with a life of 4 years and an expected $1,500 salvage value. Its annual operating costs were as follows:
Year
1
2
3
4
Cash flow
$8,000
$8400
$8800
$9200
If the MARR is 10%, the ANNUAL equivalent cost of the machine is closest to:
a. $11,725
b. $10,659
c. $8,620
d. $11,384
Incremental Investment
Incremental Rate of Return
B-A
20%
C-B
20%
C-A
24%
D-C
5%
D-B
13%
Explanation / Answer
11)
B>A
C>B
C>A
D<C
D<B
so project C
answer c
12)
last payment = 4000 * 1.04^29 = 12475
c is the answer
13)
EUAC = 10,000(A/P, 10%, 4) - 1500(A/F, 10%, 4) + 400 * (A/G,10%,4)
= 10659
B is the answer
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