Question: also use Execels IRR function Suppose a firm has two business options to choose from and has asked you, a Business Mathematics student, to help
Suppose a firm has two business options to choose from and has asked you, a Business Mathematics student, to help it make a decision. Option \"A\" requires an immediate cost of \\( \\$ 25,000 \\) along with \"upgrade costs\" of \\( \\$ 5,000 \\) in year 3 and \\( \\$ 7,500 \\) in year 6 . The returns from these investments begin in year 2 and are estimated to be \\( \\$ 3,000 \\) per year for 3 years, \\( \\$ 4,000 \\) per year for the next 3 years, and then \\( \\$ 8,000 \\) in years 8 and 9 , respectively. The only return in year 10 is a residual value of \\( \\$ 6,000 \\). Option \" \\( B \\) \" requires a cost today and in years 1 and 2 of \\( \\$ 8,000 \\) and has estimated returns beginning in year 4 and ending in year 10 of \\( \\$ 5,000 \\) per year. There will also be a residual value of \\( \\$ 4,000 \\) in year 10 . Using Excel's IRR function, find the Rate of Return for each of the two investment options available to the business based on the information given. Assume the business's expected return on investment is 15 percent. Which option would you recommend? The rate of return on option \\( \\mathrm{A} \\) is \. (Round to the nearest whole number as needed.)
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