A firm purchased a computer for 1500 EUR; the computer is used for 4 years and is then sold for 500 EUR. Annual disbursement for operating, maintenance, and software costs equals 500 EUR/year over the 4 – year period. The anual savings by using this computer is 1500 EUR/year. On the basis of a 10% MARR, determine if the decision to buy the analog computer was economically sound. Use the following measures of investment worth: a) Net Present Value (Present Worth); b) Internal Rate of Return (IRR); c) External Rate of Return (ERR); d) Simple Payback Period.

A firm purchased a computer for 1500 EUR; the computer is used for 4 years and is then sold for 500 EUR. Annual disbursement for operating, maintenance, and software costs equals 500 EUR/year over the 4 – year period. The anual savings by using this computer is 1500 EUR/year. On the basis of a 10% MARR, determine if the decision to buy the analog computer was economically sound. Use the following measures of investment worth: a) Net Present Value (Present Worth); b) Internal Rate of Return (IRR); c) External Rate of Return (ERR); d) Simple Payback Period.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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