The engineering manager at FXO Plastics wants to complete an alternative evaluation study. She asked the finance manager for the corporate MARR. The finance manager gave her some data on the project and stated that all projects must clear their average (pooled) cost by at least 4%.

(a) Use the data to determine the minimum MARR.
(b) The study is after taxes and part (a) provided the before-tax MARR. Determine the correct MARR to use if the tax rate was 32% last year and the finance manager meant that the 4% above the cost is for after-taxevaluations.

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Funds Source Amount, $ Retained earnings Stock sales Long-term loans 4,000,000 6,000,000 5,000,000 Average Cost, % 7.4 4.8 9.8