problem 9-24

9.21 The capital budgeting committee of the ABC Company is contemplating five independent proposals for projects to be included in the forthcoming vear's budget their cash flows are given in Table 9-13. The ABC Company has established a MARR of 20% Assuming that capital is not rationed, which projects should the company select and what is the total investment required? Use the ROR method. Table 9-13 End of Year Project 1 Project 2 Project 3 Project 4 Projects WN -$100000 35027 35 027 35027 35027 --$200 000 77258 77258 77 258 77258 -$150 000 -$80 000 63516 32000 63516 32000 63 51632000 63516 32000 -$300 000 98 769 98 769 98 769 98 769 Ans. ii = 15%, 13 = 20%, 13 = 25%, -21.85% (by interpolation).is - 12%. Projects 2, 3, and should be selected at a total investment of S430 000 9.22 Would the results d Problem 9 21 change if (a) MARR = 10%? (6) MARR - 13% and capital is rationed at $430000? Ans. (a) no: (b) no 923 How would the results of Problem 9.21 change f the MARR is 13%, the budget constraint is S450 000 and all the projects are divisible into smaller projects? Ans Select projects 2. 3. and 4, and spend $50 000 on project 1. How would the results of Problem 9.23 change the MARR IS 10% and none of the projects are divisible? Am. Select projects 2. 3. and 4, and leave S50 000 unspent