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EC 314: Public and Private Investment Q3: Choice

The document presents a table showing the internal rates of return between different assets. It then asks 4 questions: [1] What is the internal rate of return of asset A? [2] At a 10% MARR and 12 year service requirement, which asset would you choose? [3] At a 10% MARR with no service requirement, which asset would you choose? [4] At a 15% MARR with no service requirement, which asset would you choose? The answer key provides the answers: [1] 49.53% [2] Asset 2 [3] Asset 1 [4] Asset 1.

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Jamie Woods
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101 views2 pages

EC 314: Public and Private Investment Q3: Choice

The document presents a table showing the internal rates of return between different assets. It then asks 4 questions: [1] What is the internal rate of return of asset A? [2] At a 10% MARR and 12 year service requirement, which asset would you choose? [3] At a 10% MARR with no service requirement, which asset would you choose? [4] At a 15% MARR with no service requirement, which asset would you choose? The answer key provides the answers: [1] 49.53% [2] Asset 2 [3] Asset 1 [4] Asset 1.

Uploaded by

Jamie Woods
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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EC 314: Public and Private Investment PASS NO PASS

Q3: Choice Name:

Consider the following assets.


The far right of the table may be read as the incremental internal rate of return between
the row asset moving to the column asset.

0 1 2 3 4 PW(10%) IRR A B C D
A -2.00 0.00 0.00 0.00 10.00 49.53 -Inf -7.67 6.87
B -10.00 12.00 0.00 0.00 0.91 20.00 -Inf 5.33 11.64
C -20.00 0.00 25.00 0.00 -1.22 7.72 -7.67 5.33 19.38
D -25.00 0.00 0.00 40.00 2.32 12.47 6.87 11.64 19.38

1. What is the internal rate of return of asset A?

2. At a MARR of 10% and requirement to provide 12 years of service, which asset would
you chose?

3. At a MARR of 10% and no service requirement, which asset would you chose?

4. At a MARR of 15% and no service requirement, which asset would you chose?
Answer Key
1. Answer: 49.5348781221221%

2. Answer: 2

3. Answer: 1

4. Answer: 1

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