Module23HWSol - Module 23 Chapter 14 D2 a) None of the...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 14 D2 a) None of the projects are dominated. Alterative 2 has the best PW(15%) but worst payback. Alternative 3 has the best payback, but worst PW(15%). Alternative 1 is not dominated by alternative 3 (better PW(15%)) and alternative 2 (better payback). b) Alternatives 1 and 3. c) Alternative 1: 481 . 0 3 2 6 1 544 20 6 2 1000 716 6 3 Alternative 3: 423 . 0 2 2 6 1 40 20 6 2 1000 179 6 3 Alternative 1 is the best option. d) Alternative 1: 0 1 )] ( [ ] 544 05 . 0 716 ) 05 . 0 ( 2 [ 5 . 0 2 2 e x U E Alternative 3: 999 . 0 1 )] ( [ ] 40 05 . 0 179 ) 05 . 0 ( 2 [ 5 . 0 2 2 e x U E Alternative 3 is the best option. D5 a) AEC A = $500K (A/P, 9%, 8) + $400K + $50K (A/F, 9%, 8) = $485,803 AEC B = $350K (A/P, 9%, 6) + $450K (A/A 1 , 3%, 9%, 6) = $559,572 The decision is to select asset A. The difference in AEC, AEC B - AEC A = $559,572 - $485,803 = $73,768. Suppose there is a 30% error in investment: AEC A = $500K (1+0.3) (A/P, 9%, 8) + $400K + $50K (A/F, 9%, 8) = $512,905 AEC B = $350K (1+0.3) (A/P, 9%, 6) + $450K (A/A
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/11/2012 for the course EIN 4354 taught by Professor Tufecki during the Fall '08 term at University of Florida.

Page1 / 3

Module23HWSol - Module 23 Chapter 14 D2 a) None of the...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online