03-05 The five alternatives a re being evaluated by the rate of return method, u
ID: 2789742 • Letter: 0
Question
03-05 The five alternatives a re being evaluated by the rate of return method, using the following information: Initial investment, $ Individual Rate of Return, % Incremental IRR, %, when compared with alternative V W X Alternative 25,000 -35,000 40,000 60,000 75,000 15.0 13.0 16.0 25.4 18.0 - 27.3 19.4 35.3 25.0 - 10.0 38.5 24.4 - 46.5 12.0 . 15.0 03. If alternatives w and X are mutually exclusive and MARR = 18% per year, which one of the two alternatives is preferable? A. Neither is good B. alternative X C. alternative W D. Both are equally good Decision criterion: 04. If all five alternatives are independent, MARR-16% per year and the budget is limited to $150,000, which alternatives should be selected? A. X and Y B. X and Z C. Y and Z D. X, Y and Z Decision criterion: 05. Alternative V is contingent on Z, and W, X, Y and Z are mutually exclusive;, which alternative () should be selected if MARR = 15% per year? A. only V C. W, X and Y D. V, Y and Z B. V and Z Decision criterion:Explanation / Answer
03) Alternative [A]. Neither is good. Decision criterion: The IRR of both the alternatives is less than MARR. 04) Alternative [C] Y and Z Decision critirion: Alternatives V and W are to be rejected as their IRR is less than the MARR. All the other three, X,Y and Z cannot be implemented as the reqired capital would be $175000, the available being $150000. As all the alternatives are independent, the ones with higher IRR can be selected. The required capital of $135000 is within the available funds. 05) Decision criterion: Alternative W is to be rejected as its IRR is less than MARR. Incremental IRR for X with Y is > MARR, hence Y is preferable Incremental IRR for X with Z isRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.