10. Five revenue projects are under consideration by El Paso Garment for improvi

Question

10. Five revenue projects are under consideration by El Paso Garment for improving the material flow through an assembly line. The initial cost of each project is shown below (annual income and costs not shown) PROJECT CD E Initial cost ,S Life, yrs 7,000 16,000 9,000 3,000 23,000 From the calculations shown below, determine which project if any, should be undertaken. The company's MARR is 14% per year. If other calculations must be made in order to make a decision, select DN Comparison Incremental rate of return 13% 19% 11% 15% 24% 21% 7% 19% E vs DN A vs E D vs DN VS B vs D B vs A C vs DN Cvs A B vs DN A vs DN 0 0 10% 33% 33% 29% VS D vs C D vs E (a) Select DN (b) Select Project B (c) Select Project C (d) Select Project D (e) Select Project E

Explanation / Answer

select project B

incremental rate of return

B vs C = 33%

D vs C = 33%

and thus decisio is to select either project B or project D

but if we check other comparison of other projects such as B vs DN = 12%

and D vs DN = 11%

by comparing all these four comparisons it clearly states that project B has higher return compare to project D and thus project B should be selected.

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