I need help using the IRR and ERR method for this problem. Steps of what's happening would be helpful As the supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table.| Alternatives | A | B ||--------------|-------|-------|| Capital investment | $272,000 | $346,000 || Annual expenses^a | 28,800 | 19,300 || Useful life (years) | 6 | 9 || Market value (at end of life) | $25,000 | $40,000 |^a Excludes the cost of an operator, which is the same for both alternatives.You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with:b. the IRR method.c. the ERR method.

Assessing capital expenditures or, in cases where numerous choices are mutually exclusive, choosing…

2. As the supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. Alternatives A B $272,000 $346,000 19,300 28,800 6 Capital investment Annual expenses Useful life (years) Market value (at end of life) $25,000 $40,000 "Excludes the cost of an operator, which is the same for both alternatives. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with b. the IRR method. c. the ERR method.

2. As the supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table. Alternatives A B $272,000 $346,000 19,300 28,800 6 Capital investment Annual expenses Useful life (years) Market value (at end of life) $25,000 $40,000 "Excludes the cost of an operator, which is the same for both alternatives. You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with b. the IRR method. c. the ERR method.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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I need help using the IRR and ERR method for this problem. Steps of what's happening would be helpful

As the supervisor of a facilities engineering department, you consider mobile cranes to be critical equipment. The purchase of a new medium-sized, truck-mounted crane is being evaluated. The economic estimates for the two best alternatives are shown in the following table.

| Alternatives | A | B |
|--------------|-------|-------|
| Capital investment | $272,000 | $346,000 |
| Annual expenses^a | 28,800 | 19,300 |
| Useful life (years) | 6 | 9 |
| Market value (at end of life) | $25,000 | $40,000 |

^a Excludes the cost of an operator, which is the same for both alternatives.

You have selected the longest useful life (nine years) for the study period and would lease a crane for the final three years under Alternative A. On the basis of previous experience, the estimated annual leasing cost at that time will be $66,000 per year (plus the annual expenses of $28,800 per year). The MARR is 15% per year. Show that the same selection is made with:

b. the IRR method.
c. the ERR method.

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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