Question
You have been asked to evaluate2projects using only profitability models. a) Show the formula and calculate Average Rate of Return(ARR)and Payback Period(PP)for the following projects.
You have been asked to evaluate2projects using only profitability models.
a) Show the formula and calculate Average Rate of Return(ARR)and Payback Period(PP)for the following projects.
b)If you were making a decision based purely on Average Rate of Return,which project would you select?
c)If you were making a decision based purely on Payback Period,which project would you select?
PROJECT APPLE | PROJECT BANANA |
Interest Rate = 8% | Interest Rate = 4% |
Inflation = 2% | Inflation = 9% |
Fixed Investment = $200,000 | Fixed Investment = $50,000 |
Annual Cash Inflow = $15,000 | Annual Cash Inflow = $10,000 |
Avg. Annual Profit = $12,000 | Avg. Annual Profit = $6,000 |
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Elements Of Chemical Reaction Engineering
Authors: H. Fogler
6th Edition
013548622X, 978-0135486221
