Each of the following 8 independent projects has a 10-year life and no salvage v
ID: 1119867 • Letter: E
Question
Each of the following 8 independent projects has a 10-year life and no salvage value.
Project
Cost ´ $1,000
UAB ´ $1,000
Computed RoR
A
($50)
$12.63
21.72%
B
($200)
$32.24
9.78%
C
($175)
$30.47
11.60%
D
($50)
$7.14
7.06%
E
($75)
$13.91
13.16%
F
($100)
$17.97
12.37%
G
($25)
$5.81
19.24%
H
($100)
$13.85
6.41%
Your company has $200k capital available to invest and a 12% MARR. Based on rate of return analysis, which projects should you invest in?
A. A & F
B. A, C, E, G
C. A, E, & G
D. A, E, F, & G
Project
Cost ´ $1,000
UAB ´ $1,000
Computed RoR
A
($50)
$12.63
21.72%
B
($200)
$32.24
9.78%
C
($175)
$30.47
11.60%
D
($50)
$7.14
7.06%
E
($75)
$13.91
13.16%
F
($100)
$17.97
12.37%
G
($25)
$5.81
19.24%
H
($100)
$13.85
6.41%
Explanation / Answer
Answer
Option D
the MARR is minimum ROR required to invest in the project and the ROR above 12% is for projects A,E,F,G
so we select these projects
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