Answered step by step
Verified Expert Solution
Question
1 Approved Answer
answer d pla Initial Investment Cost Annual Revenue Alternative A Invest Large $1,200,000 $300,000 $20,000 9 years Alternative B Invest Medium $800,000 $248,000 $15,000 Alternative
answer d pla
Initial Investment Cost Annual Revenue Alternative A Invest Large $1,200,000 $300,000 $20,000 9 years Alternative B Invest Medium $800,000 $248,000 $15,000 Alternative C Invest Small $400,000 Annual Operation Cost Useful Life $200,000 $10,000 Market yalue at EoY 3 6 years 3 years Market value at EoY 6 $600,000 $300,000 $120,000 $300,000 $80,000 $40,000 Market value at EoY 9 The company's MARR is 10%. (a) If the study period is 9 years, which alternative should be chosen? State the main assumptions made. (4 marks) (b) If the study period is 6 years, which alternative should be chosen? State the main assumptions made. (4 marks) (C) Do you expect the best alternative chosen in (a) and (b) to be always the same? Explain your (1 mark) answers. (d) If the study period is 3 years, determine which alternative should be chosen using any Discounted Cash Flow Method. State the main assumptions made. (4 marks) (e) If the study period is 3 years, i.e., the product life is expected to be only 3 years, determine which alternative should be chosen using the IRR Method. You may use any equation solver to compute IRRs after stating the relevant equations that need to be solved. (6 marks) Do you expect the best alternative chosen in (d) and (e) to be always the same? Explain your answers. (1 mark)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started