Mike Moores microbrewery is considering produc-tion of a

Chapter , Problem 15-30

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Mike Moores microbrewery is considering produc-tion of a new ale called Mikes Honey Harvest Brew.Toproducethisnewoffering,Mikeisconsideringtwoindependentprojects.Each of theseprojects hastwomutually exclusive alternatives, andeach alternativehasausefullifeof10yearsandnosalvagevalue.MikesMARRis8%.Informationregardingtheproje ctsandalternatives are given in the following tableAnnualProject/AlternativeCost BenefitProject 1. Purchase newfermenting tanksAlt.A: 5000-gallon tank $ 5,000 $1192Alt.B: 15,000-gallon tank 10,000 1992Project 2. Purchase bottle fillerand capperAlt.A: 2500-bottle/hour 15,000 3337machineAlt.B: 5000-bottle/hour 25,000 4425machine Use incremental rate of return analysis to completethe following worksheet.AnnualProj./Alt. Cost,PBenefit,A(A/P,i, 10) IRR1A$ 5,000 $1192 0.2385 20%1B1A5,000 800 0.16012A15,000 33372B2A10,000Use this information to determine:(a)which projectsshould befunded if only $15,000is available.(b)the cutoff rate of return if only $15,000 is avail-able.(c)which projects should be funded if $25,000 isavailable

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