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Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $90,000. Galvanized
Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $90,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 11% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $7,000 at that time. Over the 5 -year period, Galvanized Products expects to pay a technician $25,000 per year to maintain the system but will save $56,000 per year through increased efficiencies. Galvanized Products uses a MARR of 13\%/year to evaluate investments. a. What is the external rate of return of this investment? ERR=% Do all calculations to 5 decimal places and round your final answer to 2 decimal places. Tolerance is +/.2 b. What is the decision rule for judging the attractiveness of investments based on external rate of return? c. Should the new computer system be purchased? Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $90,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 11% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $7,000 at that time. Over the 5 -year period, Galvanized Products expects to pay a technician $25,000 per year to maintain the system but will save $56,000 per year through increased efficiencies. Galvanized Products uses a MARR of 13\%/year to evaluate investments. a. What is the external rate of return of this investment? ERR=% Do all calculations to 5 decimal places and round your final answer to 2 decimal places. Tolerance is +/.2 b. What is the decision rule for judging the attractiveness of investments based on external rate of return? c. Should the new computer system be purchased
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