Question

Use the following information to answer questions 8, 9, and 10. Assume Do-Nothing is an option EOY ABC, Corp. XYZ, Co. -$275,000 $200,000 $55,000 $55,000 000 570,00 $70,000 $55,000 $55,000 $55,000 555,000 $55,000 $70,000 $70,000 $70,000 $70,000 $70,000 $55,000 $70,000 21.84% 19.22% ROR 8. The range of MARR over which ABC, Corp. is the optimal choice is closest to a) 0-8.44% b) 0-11.83% c) 0-1 9.22% d) 0-21.84% c) 8.44-11.83% f) 8.44-19.22% g)8.44-21.84% h) 11.83-19.22% i) 1 1 .83-21.84% j) 19.22-21 .84% k) greater than 8.44% l) greater than 11.83% m) greater than 19.22% n) greater than 21.84% o) none of the above 9. The range of MARR over which "Do-Nothing" is the optimal choice is closest to a) 0-844% b) 0-1 1.83% c) 0-1 9.22% d)0-21.84% e) 8.44-11.83% f) 8.44-19.22% g) 8.44-21.84% h) 11.83-19.22% i) 11.83-21.84% j) 1922-21.84% k) greater than 8.44% 1) greater than 11.83% m) greater than 19.22% n) greater than 21.84% o) none of the above 10. The decrease in the benefits that would result in a 0.00% ROR for ABC. Corporation is closest to a) $35,000/year b) $25,000/year c) $30,000 year d) S40,000/year e) $20,000/year S240,000/year g) S18,992/year h) S11,002/year ) $13,377/year

Answer 1

8. ABC RoR = 21.84%

As long as MARR is less than RoR of project ABC. It would be acceptable.

Thus, the range of MARR over which, ABC Corp is an optimal choice is 0 % to 21.84%

D. 0 - 21.84%

9. As long as one of the RoR is greater than MARR the do-nothing cannot become optimal choice. Therefore, if MARR is greater than 21.84% the do nothing can be selected.

N. Greater than 21.84%

9. The present value can be written as

$\large P = A(P/A,i\%,8)$

Thus, we can say when investment = cumulative annual benefit

200,000 = 8*A

A = $ 25,000 per year

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