Two investments are being considered by a small Wall Street investment bank. The

Question

Two investments are being considered by a small Wall Street investment bank. They both require an intial investment bank. They both require an intial investment of $500,000. The first year with annual benefit at $35,000 the first year with annual increases of 25% per year for 10 years. The second provides an annual benefit of $40,000 the first year with annual increases of $15,000 per year for 10 years. Determine a) The ROR's of each investment b) The net present worth of each investment for a MARR = 12% c) The equivalent uniform annual profit of each investment for a MARR = 12% d) Which investment should be chosen?

Explanation / Answer

ROR=325962/500000=65% for 1 st year ROR=190000/5000000=38% for 2 nd year

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.