Your friend has started a new business that owns a building.

She would like some insights on the MARR (minimum attractive rate of return) she should use to evaluate new opportunities. to use. opportunities: 1. Insulate her building at a cost of $200,000. This saves 15,600 gallons of fuel per year. Fuel currently costs $5.00 per gallon. Planning horizon is five years. In this case she would spend the whole $200,000 and save a total of ( ) She has $200,000 in funds Looking at her business, you discover the following

2. Pay off an $80,000 capital equipment loan that has an interest rate of 12% and a maturity of 5 years. ( ) ( ) ( )

Also paying this loan will leave $120,000 extra to invest in more things or pay more loans. 3. Lend another entrepreneur $120,000. This person promises to double her $120,000 in 5 years. With this option she will earn a total of $240,000 plus she will also have another $80,000 to invest.

4. Repay her car loan for her recently acquired Land Rover Range Rover. She borrowed $80, 000 for 5 years at 3.9% interest to buy this car. ( ) ( ) ( )

With this option she will have another $120,000 for other things. Also she is just saving $16k
I think that option 1 is good but it needs to be compared against a combination of the other options. Option 2 and 3 will save her $61k and will earn $240k. Leaving a total of $301k Option 3 and 4 leaves a total of $256k of savings and earnings. Option 2 and 4 is not feasible because she doesnt save much and she ends up with money that she did not use for anything.

So either option 1 or the combination of 2 and 3 could be the best option. It now depends if she can use the money for more things then option 2 and 3 are the best option. But if she has to pick one up then the most feasible is option 1