Economics Question

Anonymous
timer Asked: Nov 9th, 2016

Question description

I ONLY NEED TO calculate the change in present worth and the change in IRR to compare.

In the Rawhide Company (a leather products manufacturer), decisions regarding approval of proposals for capital investment are based upon a stipulated MARR of 18% per year. The five packaging devices listed in the table below were compared assuming a 10 year useful life and zero market value for each at that time. Which one (if any) should be selected? Use the IRR and PW method.

Packaging Equipment

A

B

C

D

E

Capital Investment

$38,000

$50,000

$55,000

$60,000

$70,000

Annual revenue less expenses

$11,000

$14,100

$16,300

$16,800

$19,200

Rate of return (IRR)

26.1%

25.3%

26.9%

25.0%

24.3%


I got this answer:


ProjectABCDE
Capital Investment (a)$38,000$50,000$55,000$60,000$70,000
Annual revenue less expenses (b)$11,000$14,100$16,300$16,800$19,200
Present Value Annuity Factor @ 18% for 10 years (c )4.49414.49414.49414.49414.4941
Present Value of (b) @ MARR (d = b*c)$49,434.95$63,366.62$73,253.61$75,500.65$86,286.46
Present Worth (e = d - a)$11,434.95$13,366.62$18,253.61$15,500.65$16,286.46
Ranking54132
Rate of return (IRR)26.10%25.30%26.90%25.00%24.30%
Ranking23145
Based on IRR method and Present Worth method Project C should be seleted as it gives highest IRR and maximum present worth

But I still need to calculate the change in present worth and the change in IRR to compare.

Tutor Answer

(Top Tutor) Studypool Tutor
School: Cornell University
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags
Study Guides

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors