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8 to 12 years. Evaluate the sensitivity of PW by varying: a) MARR, while assuming a constant n value of 10 years, and b) n, while MARR is constant at 15% per year. Perform the analysis using a spreadsheet and interpret your findings. (Please show formulas in excel)

8 to 12 years. Evaluate the sensitivity of PW by varying: a) MARR, while assuming a constant n value of 10 years, and b) n, while MARR is constant at 15% per year. Perform the analysis using a spreadsheet and interpret your findings. (Please show formulas in excel)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Wild Rice, Inc. expects to purchase a new asset for automated rice handling. Most likely estimates are a first cost of $80,000, zero salvage value, and a cash inflow per year that starts at $25,000 at the end of year 1 and then decreases year by year by $2,000, such that at the end of year two the cash flow is $23,000, etc. The MARR for the company varies over a wide range from 10% to 25% per year for different types of investments. The economic life of similar machinery varies from 8 to 12 years. Evaluate the sensitivity of PW by varying: a) MARR, while assuming a constant in value of 10 years, and b) n, while MARR is constant at 15% per year. Perform the analysis using a spreadsheet and interpret your findings. (Please show formulas in excel)
Transcribed Image Text:Wild Rice, Inc. expects to purchase a new asset for automated rice handling. Most likely estimates are a first cost of $80,000, zero salvage value, and a cash inflow per year that starts at $25,000 at the end of year 1 and then decreases year by year by $2,000, such that at the end of year two the cash flow is $23,000, etc. The MARR for the company varies over a wide range from 10% to 25% per year for different types of investments. The economic life of similar machinery varies from 8 to 12 years. Evaluate the sensitivity of PW by varying: a) MARR, while assuming a constant in value of 10 years, and b) n, while MARR is constant at 15% per year. Perform the analysis using a spreadsheet and interpret your findings. (Please show formulas in excel)
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