Calculate the accounting rate of return (ARR) for both server investments. Server A __________ /______= ____ % Server B __________ /______= ____ % Calculate the net present value for both server investments. Server A= $____ Server B= $____ Calculate the internet rate of return (IRR) for both server investments. Server A= ___% Server B=_____%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
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Porcelain Computer Company is considered purchasing two different types of servers. Server A will generate net cash inflows of $26,000 per year and have zero residual value. Server's A's estimated useful life is three years, and it costs $42,000.

Server B will generate net cash inflows of $27,000 in year 1, $14,000 in year 2, and $1,000 in year 3. Server B has a $4,000 residual value and an estimated useful life of three years. Server B also costs $42,000. Porcelain Computer Company's required rate of return is 12%.

Calculate the accounting rate of return (ARR) for both server investments.

Server A __________ /______= ____ %

Server B __________ /______= ____ %

Calculate the net present value for both server investments.

Server A= $____

Server B= $____

Calculate the internet rate of return (IRR) for both server investments.

Server A= ___%

Server B=_____%

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