Camellia Engineering Ltd is a manufacturer of high pressure steam valves and steam traps. Its initial investment on equipment was $50,000 and its annual operating costs were $20,000. The revenues generated from these products were $45,000 per year. The used equipment was salvaged for $ 4,000 at the end of 5 years. The minimum attractive rate of return of the company is 15% per year. a.Calculate the internal rate of return (IRR) that the company earned on the products. Justify your answer. b. Compute the discounted payback period for the above investment at MARR of 15% per year.
Camellia Engineering Ltd is a manufacturer of high pressure steam valves and steam traps. Its initial investment on equipment was $50,000 and its annual operating costs were $20,000. The revenues generated from these products were $45,000 per year. The used equipment was salvaged for $ 4,000 at the end of 5 years. The minimum attractive rate of return of the company is 15% per year. a.Calculate the internal rate of return (IRR) that the company earned on the products. Justify your answer. b. Compute the discounted payback period for the above investment at MARR of 15% per year.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 22P
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Question
Camellia Engineering Ltd is a manufacturer of high pressure steam valves and
steam traps. Its initial investment on equipment was $50,000 and its annual
operating costs were $20,000. The revenues generated from these products were
$45,000 per year. The used equipment was salvaged for $ 4,000 at the end of 5
years. The minimum attractive
a.Calculate the
products. Justify your answer.
b. Compute the discounted payback period for the above investment at MARR
of 15% per year.
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