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Furnace A Furnace B Furnace C Initial investment $450,000 $400,000 $300,000 Annual Revenues* $80,000 $80,000 $80,000 Annual cost* $10,000 $8,000 $13,000 Salvage value $50,000 $40,000
Furnace A | Furnace B | Furnace C | |
Initial investment | $450,000 | $400,000 | $300,000 |
Annual Revenues* | $80,000 | $80,000 | $80,000 |
Annual cost* | $10,000 | $8,000 | $13,000 |
Salvage value | $50,000 | $40,000 | $35,000 |
life of asset | 15 years | 15 years | 15 years |
I am working on problem 6-7. I am having issues calculating the IRR method. I don't know where I am going wrong. The problem states:
Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 12% per year.
*annual revenue and cost figures are increases over the "do nothing" alternative
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