Question
Chingos and Daughters Construction is considering three investment proposals:A,B, and C. Proposals A and B are mutually exclusive, and Proposal C is contingent on proposal
Chingos and Daughters Construction is considering three investment proposals:A,B, and C. Proposals A and B are mutually exclusive, and Proposal C is contingent on proposal B. The cash flow data for the investment over a 10-year planning horizon are given below. The company has a budget limit of $1 million for investments of the type being considered currently. MARR=15%.
| NCF(A) | NCF(B) | NCF(C) | |
| Initial Investment | $600,000 | $800,000 | $470,000 |
| Planning Horizon | 10 years | 10 years | 10 years |
| Salvage Values | $70,000 | $130,000 | $65,000 |
| Annual Receipts | $400,000 | $600,000 | $260,000 |
| Annual Disbursements | $130,000 | $270,000 | $70,000 |
Determine which alternative should be selected using the internal rate of return method.
The answer is Proposal B, but how do we get that answer.
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Teaching Public Budgeting And Finance
Authors: Meagan M. Jordan, Bruce D. McDonald III
1st Edition
1032146680, 978-1032146683
