Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $130,000 first cost. A similar one with many extra features, B $471,000 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 MAR 8 percent, which alternative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is should be chosen. (Type integers or decimals rounded to one decimal place as needed.) percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $130,000 first cost. A similar one with many extra features, B $471,000 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 MAR 8 percent, which alternative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is should be chosen. (Type integers or decimals rounded to one decimal place as needed.) percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter26: Real Options
Section: Chapter Questions
Problem 5P
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