Answer the following questions. (a) Use the conventional B/C ratio to evaluate the alternatives and make a

Question:

Answer the following questions.

(a) Use the conventional B/C ratio to evaluate the alternatives and make a recommendation.

(b) Use the modified B/C ratio to evaluate the alternatives and make a recommendation.

(d) Use an internal rate of return analysis to evaluate the alternatives and make a recommendation.

(e) Use the simple payback period to evaluate the alternatives and make a recommendation.

A B C

Initial investment $9500 $18,500 $22,000

Annual savings 3200 5,000 9,800

Annual costs 1000 2,750 6,400

Salvage value 6000 4,200 14,000

Project life, in years 15 15 15

MARR 12% 12% 12%

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...