You are given the following financial data about a new system to be implemented at a company: Investment cost at n = 0: $20,000. Investment cost at n = 1: $10,000. Useful life: 10 years. Salvage value (at the end of 11 years): $6,000. Annual revenues: $15,000 per year. Annual expenses: $5,000 per year. MARR: 10%. Note that the first revenues and expenses will occur at the end of year 2. (a) Determine the conventional-payback period. (1)

You are given the following financial data about a new system to be implemented at a company: Investment cost at n = 0: $20,000. Investment cost at n = 1: $10,000. Useful life: 10 years. Salvage value (at the end of 11 years): $6,000. Annual revenues: $15,000 per year. Annual expenses: $5,000 per year. MARR: 10%. Note that the first revenues and expenses will occur at the end of year 2. (a) Determine the conventional-payback period. (1)

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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#23 * Using NPW to Decide Between Competing Projects: Machine X has an initial cost of $12,000 and annual maintenance of $700 per year. It has a useful life of four years and no salvage value at the end of that time. Machine Y costs $22,000 initially and has no maintenance costs during the first year. Maintenance is $200 at the end of the second year and increases by $200 per year thereafter. Machine Y has a useful life of eight years and an anticipated salvage value of $5,000 at the end of its useful life. If the MARR is 6%, what is the approximate Net Present Worth (NPW) of machine X? A. -$28,563 B. -$25,852 C. -$32,085 D. -$22,318
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