A new anti-theft system incorporating MEMS technology is being economically evaluated separately by three engineers at Dragon

Question:

A new anti-theft system incorporating MEMS technology is being economically evaluated separately by three engineers at Dragon Technologies. The first cost of the equipment will be $75,000, and the life is estimated at 6 years with a salvage value of $9000. The engineers made different estimates of the net savings that the equipment might generate. Jacob made an estimate of $10,000 per year. Susan states that this is too low and estimates $14,000, while Tyler estimates $18,000 per year. If the before-tax MARR is 8% per year, use PW to determine if these different estimates will change the decision to purchase the equipment. Perform the analysis

(a) By hand,

(b) Using a spreadsheet.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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