Textbook Notes (369,099)
Canada (162,378)
Economics (748)
ECON 2B03 (10)
Chapter 6

Chapter 6.pdf

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Bridget O' Shaughnessy

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o Can be compared by using PW FW AW All about alternativesor calculating the MARRFor investment alternatives the PW of all cashflows must be POSITIVE at the MARR to be attractiveo Select the alternative with the largest PWFor cost alternatives the PW of all cash flows will be negative o Select the alternative with the least negative PWMAX REVENUEMIMINAL COST Mutually Exclusive Alternatives MEA selection of one alternative that excludes the choice of any other one The Study PeriodA study period is a time over which MEAs are comparedo Must consider shorter lived or longerlived alternative company policyo How long the asset will be useful for Comparing Alternatives by using Rate of ReturnMEAs can have equal lives or they can have ROR unequal lives where at least one MEA does not o RORMARR match the study periodo Lower investment is betterHandling unequa
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