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Question C part only , for d8=0 , with clear explanation thank you! Question 4 An American multinational company is now considering two mutually exclusive

image text in transcribed Question C part only , for d8=0 , with clear explanation thank you!

Question 4 An American multinational company is now considering two mutually exclusive alternatives for the environmental protection equipment at its manufacturing plant in the United Kingdom. One of these alternatives must be selected. The estimated cash flows for each alternative are listed in the below table. Alternative A Alternative B Capital investment Annual expenses Market value at end of useful life Useful life (20,000 + D8 x 1,000) (5,500 + D8 x 1,000) (1,000+ D8 x 1,000) 5 years (38.000 + D8 x 1,000) (4,000 + D8 x 1,000) (4,200 + D8 x 1,000) 10 years Assume that the equipment will be needed indefinitely and the firm's MARR relative to British pound (GBP) is 20% per year. (a) (1) To compare which environmental protection equipment alternative is better, what assumption do you need to make (Repeatability assumption or Co-terminated assumption)? (1 mark) (ii) Using your assumption above, analyse which environmental protection equipment alternative should be selected? Use 4 decimal places of the compound interest factors to do your calculation. Show detailed steps of your analysis. (Correct your final answer to 2 decimal places.) (7 marks) (b) Suppose the study period is shortened to five years. (i) If the market value of Alternative B after five years is estimated to be (15,000 + D8 x 100), which alternative would you recommend? Use 4 decimal places of the compound interest factors to do your calculation. Show detailed steps of your analysis. (Correct your final answer to 2 decimal places.) (3 marks) (ii) Assuming the market value of Alternative B after five years is (35,000 + D8 x 1,000), which alternative would you recommend? Use 4 decimal places of the compound interest factors to do your calculation. Show detailed steps of your analysis. (Correct your final answer to 2 decimal places.) (3 marks) (c) (1) Assuming British pound is devalued against the U.S. dollar by 2% per year. What is the equivalent MARR (in percentage) relative to the U.S. dollar? (Correct your final answer to 2 decimal places.) (2 marks) (ii) If the inflation rate in the United Kingdom is 3.5%, what is the real rate of MARR (in percentage) relative to British pound (GBP)? (Correct your final answer to 2 decimal places.) (2 marks)

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