7. Suppose your own consulting fi rm has been doing well and you believe it is time to make a move to add a new, related area of engineering services.

To do so, you have identifi ed the following 5 independent, indivisible, equal-lived investments, each of which guarantees you can exit it after 4 years and have your initial investment returned to you. Each year, you receive an annual return as noted below. Your MARR is 10% and you have

$250,000 to invest.

For the original problem:

a. Which alternatives should you select to form the optimum portfolio?

b. What is the present worth of your selected portfolio?

c. What is the IRR for the optimum portfolio?
In addition to the original problem statement, you now believe that investments 4 and 5 should be considered mutually exclusive.

d. Which alternatives should you now select?

e. What is the present worth for this portfolio?

f. What is the IRR now?
Reconsider the original problem:
g. 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%.
h. Determine the optimum portfolio (state the investments selected and the portfolio PW) using (1) the current MARR, (2) plus 20%, and (3) minus 20%.

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Investment Initial Investment Annual Return 2346 1 2 $45,000 $4,000 $60,000 $7,000 $85,000 $9,000 $100,000 $12,000 5 $75,000 $11,000