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Lecture No. 10 Making Choices: The Method, MARR and Multiple Attributes No. 2 o ROR, interest rate: MARR is needed for PW, FW or AW and the discount rate for B/C. o Decision guideline: Always select the alternative with the numerically largest PW, FW or AW. Example 10-1, p.351
Lecture No. 10 Making Choices: The Method, MARR and Multiple Attributes No. 3 WACC = (equity fraction)(cost of equity capital) + (debt fraction)(cost of debt capital) The cost terms are expressed as a percentage of interest rates. Since all corporations have a mix of capital sources, the WACC is a value between the debt and equity cost of capital.
Lecture No. 10 Making Choices: The Method, MARR and Multiple Attributes No. 4 o o o o Input from experts. Surveys of constituencies Focus groups Dephi method