Question
A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000,
A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of sevenyears. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production.
1-1. (2 points) If the firms MARR is 20% per year, is this proposal a sound one? Use the PW method.
1-2. (2 points) Evaluate the IRR of the proposed equipment. Is the investment a good one?
A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of sevenyears. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production.
1-1. (2 points) If the firms MARR is 20% per year, is this proposal a sound one? Use the PW method.
1-2. (2 points) Evaluate the IRR of the proposed equipment. Is the investment a good one?
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Advanced Accounting
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
11th Edition
978-0132568968, 9780132568968
