11. Rex Electric has decided to move into low-rise (2–8 fl oors) commercial building electrical wiring. After great success in upscale residential and small commercial wiring, they have identifi ed four independent and indivisible investments, any or all of which will help make the move to the next level.

Rex Electric’s MARR is 10%, and $500,000 is available for investment immediately, with $175,000 available for follow-up investment the next year.

The cash fl ows are shown below, in thousands of dollars.

a. Which alternatives should be selected by Rex Electric?

b. What is the present worth for the selected investment portfolio?

c. What is the IRR for the optimum portfolio?
Using SOLVER for sensitivity analysis,

d. determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current limit on investment capital, (2) plus 20%, and (3) minus 20%.

e. determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current MARR, (2) plus 20%, and (3) minus 20%.

Transcribed Image Text:

EOY CF(1) CF(2) CF(3) CF(4) 0 -$50 -$125 -$200 -$250 1 -$100 -$75 $50 $75 2 $50 $70 $50 $75 3 $50 $70 $50 $75 4 $50 $70 $50 $75 5 $50 $70 $75 $75 6 $50 $70 $75 $85 7 $50 $70 $75 $85 8 $50 $70 $75 $85 9 $50 $70 $75 $85 10 $75 $100 $75 $100