Galvanized Products is considering purchasing a new computer systen for their enterprise data managernent system. The vendor has quoted a purchase price of $100,000. Galvanized Praducts is planning to borrow ane fourth of the purchase price from a bank at 11% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer systern is expectad to last 5 years and has asalvage value of $4,500 at that time. Over the 5-year pariod, Galvanized Products expects to pay a technician $29,000 per ynar to naintain the system but will save $53,000 par year through increased officiencies. Galvanizud Praducts uses a MARR of 13%/year to evaluate investinents. a. What is the external rate of return of this investment? ERR - % Do alf catculations to 5 decimal places and round your final answer to 2 decimal places. Tolerance is +/2 b. What is the decision rule for judging the attractiveness of investments based on external rate of return? c. Should the new computer system be purchasad?

Galvanized Products is considering purchasing a new computer systen for their enterprise data managernent system. The vendor has quoted a purchase price of $100,000. Galvanized Praducts is planning to borrow ane fourth of the purchase price from a bank at 11% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer systern is expectad to last 5 years and has asalvage value of $4,500 at that time. Over the 5-year pariod, Galvanized Products expects to pay a technician $29,000 per ynar to naintain the system but will save $53,000 par year through increased officiencies. Galvanizud Praducts uses a MARR of 13%/year to evaluate investinents. a. What is the external rate of return of this investment? ERR - % Do alf catculations to 5 decimal places and round your final answer to 2 decimal places. Tolerance is +/2 b. What is the decision rule for judging the attractiveness of investments based on external rate of return? c. Should the new computer system be purchasad?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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