ComparingAlternativeswithRateofReturn：比较的替代品，收益率.pptVIP

Comparing Alternatives with Rate of Return Use Incremental Analysis Topics In this section, we recall the definition of ROR, discuss decision situations for multiple alternatives, and discuss the appropriate decision methodology for each situation Rate of Return Recall that the ROR of an investment is the interest rate that makes NPW = 0 NAW = 0 PW Benefits = PW Costs AW Benefits = AW Costs For a single project, accept if ROR ≥ MARR. Decisions Involving Multiple Projects Given a set of possible projects, any subset of the projects may be selected. only one may be selected, but one must be chosen. only one may be selected, but it is OK to choose none. Non-Mutually Exclusive Alternatives Suppose we can select any subset of the projects. Solution Methodology: Compute the ROR of each alternative Select each alternative for which ROR ≥ MARR Example 1: MARR = 13% Analysis ROR of A = 13.7% ROR of B = 12.7% ROR of C = 15.3% Both A and C have ROR larger than our MARR. Therefore, select both A and C. Mutually Exclusive Alternatives Suppose we must select one, only one, but at least one, alternative. Solution Methodology: Each increment of investment must yield the MARR. Perform Incremental Analysis: Recall Incremental Analysis 1. Rank the alternatives in increasing order of investment. 2. Select as the defender the alternative with the smallest investment. 3. Let the challenger be the alternative with the next higher investment. 4. Accept or reject the challenger on the basis of the return on the extra investment. The winner becomes the defender. 5. If the highest level of investment has been reached, stop. Otherwise return to step 3. Example 2: Comparing cost alternatives Ranked Alternatives MARR = 15% Alternatives: All have five-year life and no salvage Ranked Alternatives : Rank by order of increasing investment: D, B, C, A. Example 2: Incremental Analysis Defender: Project D. Next greater investment (Challenger): Project B. Is the extra investment in B over