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Scientific Instruments, Inc. uses a MARR of 10% per year. The company is evaluating a new process to reduce water effluents from its manufacturing processes.

  1. Scientific Instruments, Inc. uses a MARR of 10% per year. The company is evaluating a new process to reduce water effluents from its manufacturing processes. The estimate associated with the process follows. In evaluating the process on the basis of an internal rate of return (IRR) analysis, the correct equation to use is:

New Process

Initial Cost

$40,000

Life (years)

3

Annual Cost

$13,000

Salvage Value

$5,000

  1. $0 =- $40,000 + 13,000(P/A , IRR ,3) + $5000( P/F , IRR ,3)
  2. $0 =- $40,000(A/P, IRR ,3) - $13,000 + $5000( A/F , IRR ,3)
  3. $0 =- $40,000(F/P, IRR ,3) - $13,000(F/A, IRR, 3) + $5000
  4. Any of the above

E. $0 =- $40,000 + $13,000(P/A , MARR ,3) + $5000( P/F , IRR ,3)

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