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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
A manufacturer of electronic circuit boards is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing plant. All have lives of 10 years and zero salvage values. The required investment and the estimated after-tax reduction in annual disbursements for each alternative are as follows, along with computed rates of return on incremental investments:
Proposal Required After-Tax AjInvestmentSavingsRate of Return (%)A1$60,000$22,00035.0%A2100,00028,20025.2A3110,00032,60027.0A4120,00033,60025.0A5140,00038,40024.0A6150,00042,20025.1Â
IncrementalInvestment IncrementalRate of Return (%) A2 -A19.0%A3 -A242.8A4 -A30.0A5 -A420.2A6 -A536.3If the MARR is 15%, which project would you select, based on the rate of return on incremental investment?
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