Evaluate the two alternatives A and B and decide the economic justified alternative using: Present worth method Annual worth method , Future worth method E.R.R Method E.R.R.R method I.R.R method M.A.R.R = 15%, the details of alternatives are shown in the table below Alternatives A B

Evaluate the two alternatives A and B and decide the economic justified alternative using: Present worth method Annual worth method , Future worth method E.R.R Method E.R.R.R method I.R.R method M.A.R.R = 15%, the details of alternatives are shown in the table below Alternatives A B

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.

Question

Evaluate the two alternatives A and B and decide the economic justified
alternative using:
Present worth method, Annual worth method, Future worth method
I.R.R method
E.R.R Method
, E.R.R.R method
M.A.R.R = 15%, the details of alternatives are shown in the table below
Alternatives
A
B
Investments
$120,000 $155,000
Useful life (years)
15
20
Annual disbursements
$25,000 $35,000
Annual revenues
$45,000 $60,000
Salvage values
$25,000 $30,000

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