Following are the cash flows of five independent alternatives and the choices mu

Question

Following are the cash flows of five independent alternatives and the choices must fit within a budget. The budget, MARR and the annual rate (EAR) that unused funds will earn are shown below. Which alternatives should be chosen?

Provide Excel Formula

Budget $15,000 Unused % 5% MARR= 14% Year 0 1 2 3 4 5 Alpha ($3,000) $500 $750 $1,100 $1,500 $1,200 Beta ($5,700) $1,100 $1,500 $2,000 $2,500 $2,150 Gamma ($1,000) $300 $400 $500 $400 $300 Delta ($1,200) $500 $400 $400 $400 $200 Epsilon ($8,000) $4,000 $2,000 $2,000 $2,000 $1,500

Explanation / Answer

NPV of projects are

a) 269.52

b) 365.89

c) 301.07

d) 157.08

e) 360.86

so choose project with highest NPV...i.e is beta project

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