HW for Business/Financing
robertolll
hw2..docxInstructions:
· Read the case below and answer all four questions at the end of the case.
· Show all work when comparing alternatives and using calculated values.
· Submit your answers on a Word (.doc), Excel (.xls), or PDF (.pdf) document
Acme Engineering is evaluating 10 projects for next year’s capital budget investments. Their corporate MARR is set at 12% and all projects have a 10-year life:
|
Project |
Initial Cost (thousands) |
Annual Benefit (thousands) |
|
1 |
$50 |
$10.3 |
|
2 |
$150 |
$32.2 |
|
3 |
$100 |
$17.7 |
|
4 |
$300 |
$48.8 |
|
5 |
$50 |
$11.9 |
|
6 |
$200 |
$38.3 |
|
7 |
$50 |
$10.0 |
|
8 |
$200 |
$36.9 |
|
9 |
$50 |
$11.5 |
|
10 |
$100 |
$22.3 |
1. Calculate the IRR for every project
2. If money is not a problem which projects should be approved?
3. Rank order all the acceptable projects according to IRR
4. If only $450,00 is available for the budget which projects should be approved?
Rubric
Capital Budgeting Case
