A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR – it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR the investment will be economically justified. Click here to access the TVM Factor Table calculator. 2$ PW(9%): 2$ PW(12%): $ PW(14%):

A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR – it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR the investment will be economically justified. Click here to access the TVM Factor Table calculator. 2$ PW(9%): 2$ PW(12%): $ PW(14%):

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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