Question

In: Finance

A company is considering purchasing a new technology that requires an initial capital investment of $9,000....

A company is considering purchasing a new technology that requires an initial capital

investment of $9,000. Annual revenues from the technology are predicted to be $6,500, and

annual expenses will be $4,000. The equipment has an estimated life of 11 years, at which time

the salvage value is expected to be $1,000. The MARR for the company is 15%.

a. Using the annual worth (AW) method, determine whether purchasing the equipment is

economically justified.

b. Repeat part (a) using the internal rate of return (IRR) method.

c. Using the present worth (PW) method, determine the break-even time period after which

purchase of the equipment generates a profit. (Find N when PW = 0)

Solutions

Expert Solution

Information given is

Initial Capital investment = $9000

Annual Net Cash inflow = $6500- $4000 = $2500

Salvage value = $1000

n = 11 years

MARR = 15%

jeff jeffy answered 6 months ago
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