Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow half of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to three equal annual payments, with the first payment due at the end of year 2. The loan interest rate is 8% compounded annually. Aerotron Electronics' MARR is 10% compounded annually. Click here to access the TVM Factor Table Calculator x Your answer is incorrect. Try again. 13.9 What is this investment's external rate of return? Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is +0.2. Your answer is correct. What is the decision rule for judging the attractiveness of investments based on external rate of return? T IF ERR > MARR, ACCEPT; OTHERWISE, REJECT. Your answer is correct. Should Aerotron Electronics buy the water filtration system? Aerotron Electronics is considering purchasing a water filtration system to assist in circuit board manufacturing. The system costs $40,000. It has an expected life of 7 years, at which time its salvage value will be $7,500. Operating and maintenance expenses are estimated to be $2,000 per year. If the filtration system is not purchased, Aerotron Electronics will have to pay Bay City $12,000 per year for water purification. If the system is purchased, no water purification from Bay City will be needed. Aerotron Electronics must borrow half of the purchase price, but they cannot start repaying the loan for 2 years. The bank has agreed to three equal annual payments, with the first payment due at the end of year 2. The loan interest rate is 8% compounded annually. Aerotron Electronics' MARR is 10% compounded annually. Click here to access the TVM Factor Table Calculator x Your answer is incorrect. Try again. 13.9 What is this investment's external rate of return? Carry all interim calculations to 5 decimal places and then round your final answer to 1 decimal place. The tolerance is +0.2. Your answer is correct. What is the decision rule for judging the attractiveness of investments based on external rate of return? T IF ERR > MARR, ACCEPT; OTHERWISE, REJECT. Your answer is correct. Should Aerotron Electronics buy the water filtration system
