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Use the rate of return values of the equipment alternatives given in the following table to assist your manager to decide


Use the rate of return values of the equipment alternatives given in the following table to assist your manager to decide, if any, which one to purchase given that the MARR is 10% 

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Calculation for best alternative, When MARR is 10% :

Project number First cost Annual net income = Annual revenue - Annual Costs P/A PW of net income = net income X P/A NPW of project = PW of project - First cost  
1 $80,000 $32,000 P/A(4,10%)=3.16986 $101,435.52 $21,435.52
2 $55,000 $18,000 P/A(4,10%)=3.16986 $57,057.48 $ 2,057.48
3 $150,000 $34,000 P/A(8,10%)=5.33492 $181,387.28 $ 31,387.28
4 $25,000 $10,000 P/A(4,10%)=3.16986 $31,698.60 $ 6,698.60

Equipment 3 should be selected because it has highest NPW under MARR 10%

ekkarill92 answered 2 years ago
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