Maurice Tutor

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Teaching Since: May 2017
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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Computer Science Posted 27 Jul 2017 My Price 8.00

overall project ROR values

Last week Eduardo calculated the overall project ROR values for two alternatives A and B using the estimates below. He calculated iA* _ 34.2% and iB* _ 31.2% and recommended acceptance of A since its rate of return exceeded the established MARR of 30% by a greater amount than project B. Yesterday, the general manager of the company announced a major capital investment program, which includes a large drop in the MARR from 30% to 20% per year. Do the following to help Eduardo better understand the rate of return method and what this reduction in MARR means.

(a) Explain the error that Eduardo made in performing the rate of return analysis.

(b) Perform the correct analysis using each MARR value.

(c) Illustrate the ranking inconsistency problem using the two MARR values, and determine the maximum MARR that will justify alternative

B.

 

Alternative A

Alternative B

First cost, $

40,000

85,000

Annual operating cost,

5,500

15,000

$ per year

 

 

Annual revenue, $ per year

22,000

45,000

Salvage value, $

0

20,000

Life, years

6

6

i *, %

34.2

29.2

Answers

Maurice Tutor
(5)
Status NEW Posted 27 Jul 2017 09:07 AM My Price 8.00

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