2. Answer the following questions given the cash flow diagrams for the three projects given below....

Transcribed Image Text:

2. Answer the following questions given the cash flow diagrams for the three projects given below. Note that alternatives A and B have lifetimes of three years each, while C has a lifetime of five years. Projects are mutually exclusive. Assume MARR = 8%. Alt A Alt B Alt C 0 -$1000 -$2000 -$2200 1 480 925 620 2 480 925 620 3 480 925 620 4 620 620 1 (a) Find the Net Present Values and Internal Rates of Return for all3 alternatives. (b) Compare all alternatives and choose one using an equivalence criterion. You may assume repeatability. (c) Make the same comparison using incremental IRR with a ranking based on PW (i = 0), assuming repeatability. Make sure to calculate all IRR values for the difference cash flows to a precision of less that 0.1%. You can use any software tools you like as long as your answer is explained in the answer sheet [Hint: You will need to solve an AW-based equation similar to the one on p.103 of the class presentation (latest version)]. 2. Answer the following questions given the cash flow diagrams for the three projects given below. Note that alternatives A and B have lifetimes of three years each, while C has a lifetime of five years. Projects are mutually exclusive. Assume MARR = 8%. Alt A Alt B Alt C 0 -$1000 -$2000 -$2200 1 480 925 620 2 480 925 620 3 480 925 620 4 620 620 1 (a) Find the Net Present Values and Internal Rates of Return for all3 alternatives. (b) Compare all alternatives and choose one using an equivalence criterion. You may assume repeatability. (c) Make the same comparison using incremental IRR with a ranking based on PW (i = 0), assuming repeatability. Make sure to calculate all IRR values for the difference cash flows to a precision of less that 0.1%. You can use any software tools you like as long as your answer is explained in the answer sheet [Hint: You will need to solve an AW-based equation similar to the one on p.103 of the class presentation (latest version)].