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Problem 1 (4 points). Consider the following non-mutually exclusive investment alternatives (*$1000): Project/ Year 0 1 2 3... 10 JA (Cash flows) - 1600 -
Problem 1 (4 points). Consider the following non-mutually exclusive investment alternatives (*$1000): Project/ Year 0 1 2 3... 10 JA (Cash flows) - 1600 - 700 800 800 ... 800 B (Cash flows) - 2500 - 70011001100... 1100 C (Cash flows) - 2000-700 900 900 .... 900 (a) Rank them in their order of economic desirability using three of the following methods: NPV, B/C ratio, ROR, and Undiscounted Payback Period. (b) Verify you're your results using Incremental NPV Analysis at i* - 15%.. (c) If you have S 4.0 M and your expected i* - 15 %/ Where would you invest your money? The Benefit Cost Ratio is defined by: B/C.Ratio = EPV (+C/F@i*) EPV(-C/F@i*) A B/C ratio greater than 1.0 indicates satisfactory project economics, a ratio equal to 1.0 indicates break-even economics, and a ratio less than 1.0 indicates unsatisfactory project economics
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