At the end of the useful life of whatever equipment is chosen the product will be discontinued The company 's tax rate is 50 percent and the discount rate is 10 percent a Calculate the net present value of each alternative b Calculate the benefit cost ratio for each alternative c Calculate the inte...

a Alternative I Alternative II Annual Receipts 50000 60000 Annual Disbursements 20000 12000 Earnings ...

At the end of the useful life of whatever equipment is chosen the product will be discontinued.

Question:

At the end of the useful life of whatever equipment is chosen the product will be discontinued. The company's tax rate is 50 percent and the is 10 percent.
a. Calculate the of each alternative.
b. Calculate the benefit cost ratio for each alternative.
c. Calculate the for each alternative.
d. If the company is not under which alternative should be chosen? Why?
e. Again assuming no suppose the company plans to produce the product indefinitely rather than quit when the equipment wears out. Which alternative should the company select? Why?
f. If the company is experiencing severe and plans to terminate production when the equipment wears out, would any of your answers above change?
Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at... 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... Capital Rationing
Capital rationing is the act of placing restrictions on the amount of new investments or projects undertaken by a company. Capital rationing is the decision process used to select capital projects when there is a limited amount of funding available.... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...