NB:Solve it using Excel

Polaris Industries has $1,250,000 available for additional

innovations on the Victory Vision motorcycle. These include the 5 indivisible,

equal-lived alternatives, each of which guarantees the investment can be

exited after 6 years with the initial investment returned. In addition, each year

Polaris will receive an annual return as noted below. MARR is 15%.

Investment Initial Investment Annual Return

1 $350,000 $90,000

2 $300,000 $85,000

3 $250,000 $75,000

4 $500,000 $130,000

5 $400,000 $115,000

For the original problem:

a. Which alternatives should Polaris select for the optimum portfolio?

b. What is the present worth for the optimum investment portfolio?

c. What is the IRR for the portfolio?

In addition to the original problem statement, Polaris has noted that

investments 1, 2, and 4 are mutually exclusive, and marketing believes at

least 3 investments must be made.

d. Which alternatives should now be selected?

e. What is the present worth for the optimum investment portfolio?

f. What is the IRR for the optimum investment portfolio?

Return to the original problem statement:

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) a MARR of 18%, and (3) a MARR of 12%.