Cato Springs Chemicals International, a batch chemical processing company, is considering acquiring new technology in order...

 

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Cato Springs Chemicals International, a batch chemical processing company, is considering acquiring new technology in order to enter a new specialty chemicals market. Three suppliers (A, B, and C) of specially designed centrifuges and associated equipment are under consideration. Depending on which supplier is chosen, slightly different markets will be pursued. The forecasts of net cash flows over a 10-year planning horizon for the three alternatives are given below. EOY CF(A) CF(B) CF(C) $10,520,900 $6,965,300 $8,808,300 1 -$1,320,600 -$721,200 $1,127,300 $3,336,600 $2,125,800 $2,794,000 $3,590,900 $2,361,500 $3,030,900 4 $3,834,400 $2,644,700 $3,286,000 $3,986,400 $2,699,800 $3,471,000 $4,204,000 $2,783,500 $3,792,800 7 $4,504,300 $2,908,400 $3,952,200 8 $4,669,200 $3,150,000 $4,003,700 9. $5,150,200 $3,978,200 $5,423,300 10 $9,625,600 $5,385,700 $8,584,900 Part a Perform an internal rate of return analysis to which, if any, of the mutually exclusive investments should be pursued, using a minimum attractive rate of return of 15%. * should be calculated first: IRR = %. Therefore, it * acceptable. Next, + should be calculated: IRR = %. Therefore, it * acceptable. Next, * should be calculated: IRR = %. Therefore, it + acceptable. Round entries to 2 decimal places. The tolerance is ±0.02. Thus, * is preferred. Cato Springs Chemicals International, a batch chemical processing company, is considering acquiring new technology in order to enter a new specialty chemicals market. Three suppliers (A, B, and C) of specially designed centrifuges and associated equipment are under consideration. Depending on which supplier is chosen, slightly different markets will be pursued. The forecasts of net cash flows over a 10-year planning horizon for the three alternatives are given below. EOY CF(A) CF(B) CF(C) $10,520,900 $6,965,300 $8,808,300 1 -$1,320,600 -$721,200 $1,127,300 $3,336,600 $2,125,800 $2,794,000 $3,590,900 $2,361,500 $3,030,900 4 $3,834,400 $2,644,700 $3,286,000 $3,986,400 $2,699,800 $3,471,000 $4,204,000 $2,783,500 $3,792,800 7 $4,504,300 $2,908,400 $3,952,200 8 $4,669,200 $3,150,000 $4,003,700 9. $5,150,200 $3,978,200 $5,423,300 10 $9,625,600 $5,385,700 $8,584,900 Part a Perform an internal rate of return analysis to which, if any, of the mutually exclusive investments should be pursued, using a minimum attractive rate of return of 15%. * should be calculated first: IRR = %. Therefore, it * acceptable. Next, + should be calculated: IRR = %. Therefore, it * acceptable. Next, * should be calculated: IRR = %. Therefore, it + acceptable. Round entries to 2 decimal places. The tolerance is ±0.02. Thus, * is preferred.

Answer rating: 100% (QA)

MARR 15 If IRR MARR project should be accepted IRR should be calculated first I... View the full answer