![EBK ENGINEERING ECONOMY](https://www.bartleby.com/isbn_cover_images/8220103675437/8220103675437_largeCoverImage.jpg)
Calculate the
![Check Mark](/static/check-mark.png)
Explanation of Solution
Initial cost (C) is $130,000. Repayment in year 1 (R1) is 78,000 and increases (I) by $1,000 per year thereafter. Equivalent annual cost (AC) is $49,000. Time period (1) is 8.
Rate of return (i) can be calculated as follows:
Substitute the rate of return as 19% by trial and error method in the above Equation.
When the rate of return is substituted as 19%, the calculated value is greater than the initial cost. Thus, the rate of return increases to 19.17%.
The calculated value is nearly equal to initial cost with rate of return 19.17%. Thus, it is confirmed that the rate of return is 19.17%.
The spreadsheet function to calculate the rate of return is given below:
The rate of return is 19.17%.
Want to see more full solutions like this?
Chapter 7 Solutions
EBK ENGINEERING ECONOMY
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
![Text book image](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)