Question
In: Economics
A popular equipment company wants to provide a new computerized sound system in order to play...
A popular equipment company wants to provide a new computerized sound system in order to play at bigger convert that will generate $ 11 million dollar in new income. The system costs $4 million dolars has a life of 10 years and annual maintainace cost that is 5% of the initial cost at year 5 the system will require $50 thousands rebuild and upgrade cost the company IRR is 6 % and MARR =20% determine the RoR for the investment
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Expert Solution
| Year | Cash outflows | Cash inflows | Net cash flows | Present value net cash flows |
| 0 | $4,000,000 | |||
| 1 | $200,000 | $11,000,000 | $10,800,000 | $9,000,000.0 |
| 2 | $200,000 | $11,000,000 | $10,800,000 | $7,500,000.0 |
| 3 | $200,000 | $11,000,000 | $10,800,000 | $6,250,000.0 |
| 4 | $200,000 | $11,000,000 | $10,800,000 | $5,208,333.3 |
| 5 | $250,000 | $11,000,000 | $10,750,000 | $4,320,183.9 |
| 6 | $200,000 | $11,000,000 | $10,800,000 | $3,616,898.1 |
| 7 | $200,000 | $11,000,000 | $10,800,000 | $3,014,081.8 |
| 8 | $200,000 | $11,000,000 | $10,800,000 | $2,511,734.8 |
| 9 | $200,000 | $11,000,000 | $10,800,000 | $2,093,112.4 |
| 10 | $200,000 | $11,000,000 | $10,800,000 | $1,744,260.3 |
| $45,258,604.6 |
Rate of return = Average income 
Average
investment
Average income = $45,258,604.6 / 10
Average income = $4,525,860.46
Average investment = $ 4,000,000 2
Average investment = $ 2,000,000
Rate of return =$4,525,860.46 $
2,000,000
Rate of return = 226.29%
Rahul Sunny answered 1 year agoRelated Solutions
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