3360 UNIT 15 2014-I-01
Transcript of 3360 UNIT 15 2014-I-01
-
8/19/2019 3360 UNIT 15 2014-I-01
1/20
ENGR 3360U Winter 2014
Unit 15
Dr. J. Michael Bennett, P. Eng., PMP,
UOIT,
Version 2014-I-01
MARR Selection
-
8/19/2019 3360 UNIT 15 2014-I-01
2/20
Unit 15 MARR Selection
Change Record
2014--01 nitial Creation
2014--0115-2 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco
-
8/19/2019 3360 UNIT 15 2014-I-01
3/20
Unit 15 MARR Selection
Co'r(e )'tline
1" Engineering Econo*ic(
2" General Econo*ic(
1" Microecono*ic(
2" Macroecono*ic(
3" Mone+ and the $an, oCanada
3" Engineering E(ti*ation
4" ntere(t and E.'i/alence
5" &re(ent Worth Anal+(i(
6" Ann'al Ca(h lo
" Rate o Ret'rn Anal+(i(
" &ic,ing the $e(t Choice
" )ther Choo(ing echni.'e(
10" Uncertaint+ and Ri(,
11" nco*e and !ereciation
12" Ater-ta7 Ca(h lo(
13" Relace*ent Anal+(i(
14" nlation15" MARR Selection
16" &'8lic Sector (('e(
1" What Engineering (ho'ld ,no
a8o't Acco'nting
1" &er(onal Econo*ic( or the
Engineer
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco1-3
-
8/19/2019 3360 UNIT 15 2014-I-01
4/20
Unit 15 MARR Selection
Unit 15 Road Ma
9 15"1 Caital and it( co(t to an organi:ation9 15"2 )ort'nit+ Co(t(
9 15"3 Choo(ing the MARR
9 15"4 Caital 8'dgeting
2014--0115-4 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco
-
8/19/2019 3360 UNIT 15 2014-I-01
5/20
Unit 15 MARR Selection
15"1 Co(t o 'nd(
9 $orroed Mone+ ; )ne actor that ill deter*ine MARR i( the
co(t o 8orroing *one+"
9 Co(t o Caital ; he *one+ a ir* '(e( i( dran ro* the ir*
-
8/19/2019 3360 UNIT 15 2014-I-01
6/20
Unit 15 MARR Selection
WACC+ E7a*leA ir* ha( the olloing inancial (it'ation?
Co**on (hare( re.'ire a R)R =di/idend> o 11@$ond( are (old at @
Mone+ can 8e 8orroed at @
a7e( are 40@
What i( it( WACC
BBBBBBBBBBR)R Ann'al
20M loan @ 1"M
20M 8ond( @ 1"4M
60M (hare( 11@ 6"6M
100M "M
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-6
-
8/19/2019 3360 UNIT 15 2014-I-01
7/20
Unit 15 MARR Selection
A(('*e ir* ha( a 40@ ta7 rate"
Ater-ta7 $an, loan @=1 - 0"40> 5"4@
Ater-ta7 $ond( @=1 - 0"40> 4"2@
!i/idend( are not a7-ded'cti8le
CoC 20M=5"4@> D 20M=4"2@> D 60M=11@>
"52M or the 100M@CoC "52100 "52@
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-
-
8/19/2019 3360 UNIT 15 2014-I-01
8/20
Unit 15 MARR Selection
E7a*le 15"2 &o((i8le &roFect(
Proj # Cost eROR
1 150, 30@
2 50, 45@
3 50, 3@
4 100, 40@5 200, 35@
6 100, 2@
200, 1@
250, 25@
300, 20@
10 300, 10@
11 400, 15@
12 Unli*ited =8ond(> @
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-
-
8/19/2019 3360 UNIT 15 2014-I-01
9/20
Unit 15 MARR Selection
What i
o' had onl+ 00H hich o'ld +o'
choo(e
Ran, 8+ RoR
2%4%3%5%1%6
)ort'nit+ co(t o'ld 8e roF =250H>
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-
-
8/19/2019 3360 UNIT 15 2014-I-01
10/20
Unit 15 MARR Selection
15"2 )ort'nit+ Co(t
9 A ir* *a+ ha/e a 8road range o in/e(t*entoort'nitie("
9 o actor(? ; So'rce o *one+ a/aila8le or roFect( ;
ir*
-
8/19/2019 3360 UNIT 15 2014-I-01
11/20
Unit 15 MARR Selection
E7a*le 15-3
P# Cost Ks UAB Ks Life ! cRoR"
1 100 23"5 10 0 202 200 3"5 10 0 15
3 50 34"2 2 0 25
4 100 20 6 100 20
5 100 20 10 100 20
6 100 1 10 100 1
300 4"64 4 0 10
300 4"4 10 100 12
50 10 50 14
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-11
I650H i( a/aila8le% hat i( the )ort'nit+ Co(t o Caital
-
8/19/2019 3360 UNIT 15 2014-I-01
12/20
Unit 15 MARR Selection
Sol'tion? ran, 8+ RoR
3J1J4J5J6J2
)C 14@ =roFect >
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-12
-
8/19/2019 3360 UNIT 15 2014-I-01
13/20
Unit 15 MARR Selection
15"3 Selecting the MARR
9 Mini*'* Attracti/e Rate o Ret'rn =MARR> ; A loer 8o'ndar+ or MARR *'(t 8e the co(t o
the *one+ in/e(ted in a roFect" ; MARR (ho'ld not 8e le(( than the co(t o caital" ; MARR (ho'ld not 8e le(( than the rate o ret'rn
on the 8e(t oort'nit+ oregone"
9 MARR (ho'ld 8e e.'al to the large(t o? ; Co(t o 8orroed *one+ ; Co(t o caital ; )ort'nit+ Co(t
2014--0115-13 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco
-
8/19/2019 3360 UNIT 15 2014-I-01
14/20
Unit 15 MARR Selection
MARR
9 MARR *a+ 8e adF'(ted 8a(ed on ercei/edri(," ; Kigher ri(, *a+ re.'ire a higher MARR to
deter*ine the /alidit+ o an alternati/e"
9 Co*anie( 'nder a nor*al le/el o ri(, ha/et+ical MARR rate( o 12@;15@"
9 Koe/er% *'ch higher rate( are co**on or
dierent ind'(trie(% ('ch a( technolog+ (tart-'( (hort o caital or etrole'*% here the
ri(,( *a+8e *'ch higher"
2014--0115-14 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco
-
8/19/2019 3360 UNIT 15 2014-I-01
15/20
Unit 15 MARR Selection
Ri(, increa(e( MARR
Additional rate alie( to
06@ e.'i*ent relace*ent
0@ ne e.'i*ent
10@ ne rod'ct% nor*al *ar,et
12@ ne rod'ct% related *ar,et
14@ ne rod'ct% ne *ar,et
16@ ne rod'ct% oreign *ar,et
2014--01 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco15-15
-
8/19/2019 3360 UNIT 15 2014-I-01
16/20
Unit 15 MARR Selection
15"4 Caital $'dgeting
9 ir*( do not ha/e acce(( to 'nli*ited'nding to in/e(t in roFect(" ; E7a*le? S'o(e 20 roFect( e7ceed the
MARR and there i( li*ited 'nding (o not all roFect( ith 8e 'nded"
9 So*e ir*( ill Ran, roFect( 8a(ed on theL8igge(t 8ang or the 8'c,
-
8/19/2019 3360 UNIT 15 2014-I-01
17/20
Unit 15 MARR Selection
Caital $'dgeting% cont
-
8/19/2019 3360 UNIT 15 2014-I-01
18/20
Unit 15 MARR Selection
S'**ar+
9 here are dierent (o'rce( o caitala/aila8le to a ir*" ; Mone+ generated ro* oeration
; !e8t? $orroed *one+ ; E.'it+? Sale o e.'it+ li,e co**on or
reerred (hare(
2014--0115-1 !r" #"M" $ennett% &"Eng"% &M& ENGR 3360U Eng Eco
U i 15 MARR S l i
-
8/19/2019 3360 UNIT 15 2014-I-01
19/20
Unit 15 MARR Selection
S'**ar+% cont
-
8/19/2019 3360 UNIT 15 2014-I-01
20/20
Unit 15 MARR Selection
S'**ar+% cont