4: A technologist has narrowed her choice of robots to work on a hazardous material project. She must choose either the HAL or the IBM or not do the project. The HAL robot can be purchased for $150,000 and will generate $30,000 of revenue whereas for the IBM robot, the numbers are $80,000 and $15,000, respectively. Each robot has a 10 year useful life and the same maintenance costs (very small) but because of hazardous waste contamination, neither robot has a salvage value. The MARR is 10%.

What is the incremental IRR between these two potential projects?

Answer: <6 pts>

Reasoning/Work:

Which robot (if any) should be purchased?

Answer: <1 pts>

Reasoning/Work:

Analysis Period

5: A restauranteur has enough money to invest in one additional restaurant. He is thinking of either adding another one of his traditional FitzRubbish fried-chicken eateries (which have revenues of $250,000 per year) or widening his business strategy by jumping on the health food trend in obtaining a Yogurt Fantasy franchise, which has a price tag of $1.75 million but can earn a yearly revenue of $300,000 over its estimated 12 year useful life. The additional chicken eatery would only cost him $1,200,000 but he knows that with people wanting healthier foods, the useful life of it would probably be about 10 years and be worthless after that; whereas he probably could get $250,000 if he sold his used yogurt equipment at the end of that business. At the end of 10 years, the chicken eatery is not replaced. So you must compare 12 years of yogurt against 10 years of chicken. The MARR = 10%.

Using a present worth analysis, what is the IRR of the yogurt option?

Answer: <4 pts>

Reasoning/Work:

Using a present worth analysis, what is the IRR of the chicken option?

Answer: <4 pts>

Reasoning/Work:

Assuming both options meet the 10% MARR, what is the incremental IRR between the two options?

Answer: <4 pts>

Reasoning/Work:

Which type of restaurant should he choose?

Answer: <1 pts>

Reasoning/Work: