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b) A company has three alternative investments which are being considered. Because all three investments are for the same type of unit and yield the

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b) A company has three alternative investments which are being considered. Because all three investments are for the same type of unit and yield the same service, only one of the investments can be accepted. The risk factors are the same for all three cases. Company policies, based on the current economic situation, dictate that a minimum annual return on the original investment of 15 percent after taxes must be predicted for any unnecessary investment with interest on investment not included as a cost. (This may be assumed to mean that other equally sound investments yielding a 15 percent return after taxes are available. Company policies also dictate that, where applicable. straight-line depreciation is used and, for time-value of money interpretations, end-of- year cost and profit analysis is used Land value and prestartup costs can be ignored. Given the following data, determine which investment, if any, should be made by alternative- analysis profitability-evaluation methods of (0) Rate of return on initial investment (i) Minimum payout period with no interest charge (iii) Discounted cash flow (iv) Net present worth Invest Total initial Working Salvage value Service Annual cash flow to Annual cash ment fixed-capital capital at end of Tite projects after expenses numb investment Investmen service tite, s years taxes, constant for $ LS each year). 140,000 20,000 10,000 35,000 constant) 44,000 170,000 10,000 15.000 52.000 (constant) 28,000 210.000 15.000 20.000 56.000 (constant) 21,000 er b) A company has three alternative investments which are being considered. Because all three investments are for the same type of unit and yield the same service, only one of the investments can be accepted. The risk factors are the same for all three cases. Company policies, based on the current economic situation, dictate that a minimum annual return on the original investment of 15 percent after taxes must be predicted for any unnecessary investment with interest on investment not included as a cost. (This may be assumed to mean that other equally sound investments yielding a 15 percent return after taxes are available. Company policies also dictate that, where applicable. straight-line depreciation is used and, for time-value of money interpretations, end-of- year cost and profit analysis is used Land value and prestartup costs can be ignored. Given the following data, determine which investment, if any, should be made by alternative- analysis profitability-evaluation methods of (0) Rate of return on initial investment (i) Minimum payout period with no interest charge (iii) Discounted cash flow (iv) Net present worth Invest Total initial Working Salvage value Service Annual cash flow to Annual cash ment fixed-capital capital at end of Tite projects after expenses numb investment Investmen service tite, s years taxes, constant for $ LS each year). 140,000 20,000 10,000 35,000 constant) 44,000 170,000 10,000 15.000 52.000 (constant) 28,000 210.000 15.000 20.000 56.000 (constant) 21,000 er

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