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A local hosptil is investing in a new plasma arc furnace for the incineration of medical wastes. The initial investment is $300,000 and annual revenues
A local hosptil is investing in a new plasma arc furnace for the incineration of medical wastes. The initial investment is $300,000 and annual revenues are expected to be $175,000 over the six-year life of the furnace. Annual expenses will be $100,000 at the end of year one and will increase by $5,000 each year thereafter. The resale value of the furnace after six years is $20,000. a. Draw the cash flow diagram. b. What is the simple payback period of the furnace? c. What is the internal rate of return on the furnace? You may need the following to solve the problem: - (P/F,8%,6)=0.6302 - (P/A,8%,6)=4.6229 - (P/G,8%,6)=10.523 - (P/F,9%,6)=0.5963 - (P/A,9%,6)=4.4859 - (P/G,9%,6)=10.092 A local hosptil is investing in a new plasma arc furnace for the incineration of medical wastes. The initial investment is $300,000 and annual revenues are expected to be $175,000 over the six-year life of the furnace. Annual expenses will be $100,000 at the end of year one and will increase by $5,000 each year thereafter. The resale value of the furnace after six years is $20,000. a. Draw the cash flow diagram. b. What is the simple payback period of the furnace? c. What is the internal rate of return on the furnace? You may need the following to solve the problem: - (P/F,8%,6)=0.6302 - (P/A,8%,6)=4.6229 - (P/G,8%,6)=10.523 - (P/F,9%,6)=0.5963 - (P/A,9%,6)=4.4859 - (P/G,9%,6)=10.092
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