Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $140,000 first cost. A similar one with many extra features, B has a $569,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which altemative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore, should be chosen.

Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $140,000 first cost. A similar one with many extra features, B has a $569,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which altemative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore, should be chosen.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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