Consider two investments with the following sequences of cash flows: (a) Compute the i* for each investment.

Question:

Consider two investments with the following sequences of cash flows:
Net Cash Flow Project A -$30,000 Project B п -$15,000 $10,000 $2,000 $6,000 $10,000 $10,000 $12,000 3 $10,000 $24,000 4

Net Cash Flow Project A -$30,000 Project B п -$15,000 $10,000 $2,000 $6,000 $10,000 $10,000 $12,000 3 $10,000 $24,000 4

(a) Compute the i* for each investment.
(b) Plot the present-worth curve for each project on the same chart and find the interest rate that makes the two projects equivalent.
(c) If A and B are mutually exclusive investment projects, which project is more economically desirable at MARR of 15%?

MARR
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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