1) Your boss is considering two different investment alternatives, with the following cash flows: Year Alternative...
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1) Your boss is considering two different investment alternatives, with the following cash flows: Year Alternative 1 Alternative 2 0 -$4,000 1 1,200 2 1,200 3 1,200 4 1,200 5 3,200 The minimum acceptable rate of return is 10% per year. a) What is the annual worth of alternative 1? -$2,000 750 750 750 750 2,000 b) What is the annual worth of alternative 2? c) Given your answers to parts a) and b), which alternative should be selected? d) Now, compute the annual worth of alternative 1, if in addition to the annual profit of 750, there is also a one-time maintenance cost of 1,000 in year 3. 1) Your boss is considering two different investment alternatives, with the following cash flows: Year Alternative 1 Alternative 2 0 -$4,000 1 1,200 2 1,200 3 1,200 4 1,200 5 3,200 The minimum acceptable rate of return is 10% per year. a) What is the annual worth of alternative 1? -$2,000 750 750 750 750 2,000 b) What is the annual worth of alternative 2? c) Given your answers to parts a) and b), which alternative should be selected? d) Now, compute the annual worth of alternative 1, if in addition to the annual profit of 750, there is also a one-time maintenance cost of 1,000 in year 3.
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a To calculate the annual worth of alternative 1 you can use the annual worth form... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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