A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is Php50,000, and the equipment will have a market value of Php10,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to Php16,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. A cash-flow diagram for this investment opportunity is given below. If the firm’s MARR is 20% per year, is this proposal a sound one? Use the PW method.

A piece of new equipment has been proposed by engineers to increase the productivity of a certain manual welding operation. The investment cost is Php50,000, and the equipment will have a market value of Php10,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to Php16,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. A cash-flow diagram for this investment opportunity is given below. If the firm’s MARR is 20% per year, is this proposal a sound one? Use the PW method.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 7E

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A piece of new equipment has been proposed by engineers to increase theproductivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market value of $5,000 at the end of a study period of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the revenue generated by the additional production. A cash-flow diagram for this investment opportunity is given below. If the firm’s MARR is 20% per year, is this proposal a sound one? Use the PW method.
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A piece of new equipment has been proposed by engineers to increase theproductivity of a certain manual welding operation. The investment cost is$25,000, and the equipment will have a market value of $5,000 at the endof a study period of five years. Increased productivity attributable to theequipment will amount to $8,000 per year after extra operating costs havebeen subtracted from the revenue generated by the additional production.A cash-flow diagram for this investment opportunity is given below. If thefirm’s MARR is 20% per year, is this proposal a sound one? Use the PWmethod.
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