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22 December, 16:52

Two projects, A and B, are analyzed using ranking present worth analysis with MARR at i%. It is found that PW (A). PW (B). If MARR is changed to (i 1 1) %, what will be the relationship between PW (A) and PW (B) ?

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  1. 22 December, 17:33
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    Answer: The relationship between A and B project cannot be determined with the information given.

    Explanation: The relationship between PW (A) and PW (B) is the correlation between project A and Project B in a portfolio.

    This is not possible to be calculated with the information given.

    But an expression of calculating this is;

    PW is the present value of A and B projects.

    MARR is the minimum acceptable rate of return

    The calculate the correlation of the two project, divide MARR by the multiple of the two project.

    That is;

    Correlation = MARR : [PW (A) * PW (B) ]

    Therefore;

    Correlation = i11% : [PW (A) * PW (B) ]

    This shows that the relationship cannot be determined with the limited Information supplied.
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Home » Business » Two projects, A and B, are analyzed using ranking present worth analysis with MARR at i%. It is found that PW (A). PW (B). If MARR is changed to (i 1 1) %, what will be the relationship between PW (A) and PW (B) ?
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