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8-4 A paper mill is considering two types of pollution control equipment. A Neutralization Precipitation Initial cost $850,000 $625,000 Annual chemical cost 55,000 125,000 200,000 Salvage value Useful life, in years |150,000 (a) Construct a choice table for interest rates from 0% to 100%. (b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?

8-4 A paper mill is considering two types of pollution control equipment. A Neutralization Precipitation Initial cost $850,000 $625,000 Annual chemical cost 55,000 125,000 200,000 Salvage value Useful life, in years |150,000 (a) Construct a choice table for interest rates from 0% to 100%. (b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter9: Capital Budgeting Techniques
Section: Chapter Questions
Problem 12PROB
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Please answer both part A and B

8-4 A paper mill is considering two types of pollution control equipment. A Neutralization Precipitation Initial cost $850,000 $625,000 Annual chemical cost 55,000 125,000 Salvage value 200,000 150,000 Useful life, in years 5 (a) Construct a choice table for interest rates from 0% to 100%. (b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?
Transcribed Image Text:8-4 A paper mill is considering two types of pollution control equipment. A Neutralization Precipitation Initial cost $850,000 $625,000 Annual chemical cost 55,000 125,000 Salvage value 200,000 150,000 Useful life, in years 5 (a) Construct a choice table for interest rates from 0% to 100%. (b) The firm wants a 25% rate of return on any avoidable increments of investment. Which equipment should be purchased?
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