A carpet manufacturer, whose discount rate is 10%, can purchase texturizingequipment for $1,250,000 to process yarn. Incremental income before straight linedepreciation from sales of texturized carpets is projected over the next five years as$95,000, $165,000, $357,000, $725,000 and $315,000, respectively. The companybelieves that the fashion will pass and demand in Year 6 will all but disappear. Themachine can be sold at the end of Year 5 for $250,000. What should you advise thecompany to do?Select one:O A. Purchase the equipment as ARR is 10.9%.O B. Not purchase the equipment as the ARR is only 9.3%.O C. Not purchase the equipment as NPV is ($54,784).O D. Purchase the equipment as both the NPV and ARR are negative.O E. Purchase the equipment as NPV is $86,952.O

Here, the decision is required to purchase the equipment, I would use NPV or net present value…

Answered: A carpet manufacturer, whose discount…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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