A 10-year, 8.00%, $4,000 bond that pays dividends quarterly can be purchased for $3,515. This means that $3,515 is spent on the bond now. Every quarter, $80.00 is provided to the purchaser as the dividend. After 10 years, $4,000 is given to the purchaser. If the bond is purchased and pays as scheduled, which of the following ranges of effective rate of return will the purchaser receive? 0 8.50% - 9.55% O 8.00% - 8.50% O 10.81% - 12.81% C) 9.80% - 10.80% Use Rate of Return Analysis to determine whether Alternative A or B should be chosen. Assume the MARR is 4% per year, compounded annually. 1039 Initial Cost Salvage Value Useful Life (yrs) 0 Alternative B should be chosen, because the incremental rate of return of B-A is 0.75%, which is less than the MARR 0 Alternative A should be chosen, because the incremental rate of return of B-A is 0.75%, which is less than the MARR O Alternative A should be selected because its rate of return is 5.84%, which is greater than the MARR O Alternative B should be selected because its rate of return is 3.48%, which is less than the MARR Which alternatives can be eliminated immediately in the first step of incremental rate of return analysis, if MARR = 11.5%? Do-nothing A B C D First cost $8,500 $4,500 $9,500 $6,000 Annual O 1,504 880 1,786 935 benefit Life 10 yrs ROR 12.0% 14.5% 13.5% 9.0% O D only O D and A O D and B O D and CWhich increment should be examined first in incremental rate of return analysis, if MARR = 12.0%? Do-nothing A B C D First cost 0 $6,500 $4,000 $7,500 |$7,000 Annual O 1,198 812 1,438 1,164 benefit Life 10 yrs ROR 13.0% 15.5% 14.0% 10.5% O D-A O A-C O B-C O A-BWhich alternative should be selected using incremental rate of return analysis, if MARR = 11.5%? Do-nothing A B C D First cost $5,500 $3,000 $6,500 $6,000 Annual O 993 632 1,320 956 benefit Life 10 yrs ROR 12.5% 16.5% 15.5% 9.5% O B, because its ROR is the highest O something other than C, because C costs the most initially O C, because the C-B increment has a ROR of 14.63% and the A-B increment has a ROR of 7.31% O C because C has the highest annual benefitTwo mutually exclusive projects are under consideration: Year Project A Project B 0 -$5,500 -$9,000 1 2,200 2,000 2 2,200 3,000 3 2,200 4,000 4 2,200 5,000 5 2,200 6,000 Which project should be selected if the simple payback method is used to make the determination? O B; its payback period is longer 0 A; its payback period is shorter O Not enough information