Five revenue projects are under consideration by General Dynamics for improving material flow through an assembly line.
Question:
Five revenue projects are under consideration by General Dynamics for improving material flow through an assembly line. The initial cost in $1000 and the life of each project are as follows (revenue estimates are not shown):
An engineer made the comparisons shown below.
From the calculations, determine which project, if any, should be undertaken if the company's MARR is
(a) 11.5% per year
(b) 13.5% per year. If other calculations are necessary to make a decision, state which ones.
Comparison Incremental Rate of Return, %
B vs DN ............13%
A vs B ............19%
D vs DN ............11%
E vs B .............15%
E vs D .............24%
E vs A .............21%
C vs DN ............ 7%
C vs A ............19%
E vs DN ............12%
A vs DN ............10%
E vs C .............33%
D vs C .............33%
D vs B.............29%
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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