A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR thn inuortmr ill ho oronom iuctifiod
A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR thn inuortmr ill ho oronom iuctifiod
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A design firm is considering investing in a software suite that costs $200,000. It
estimates that the software will allow it to better present its design ideas and generate
an additional revenue of $70,000 per year for each of the next 4 years. At the end of
those 4 years, the firm will need to upgrade its software and the software suite would
have negligible salvage value. Due to changes in the economy, the design fırm is
reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate
the present worth at each of these MARRS, and determine for which values of the MARR
the investment will be economically justified.
Click here to access the TVM Factor Table calculator.
$4
PW(9%):
PW(12%):
$4
PW(14%):
Justified when MARR is
%.
Carry all interim calculations to 5 decimal places and then round your final answers for
the PWs to a whole number and for the IRR to 1 decimal place. The tolerance is ±20 for
the PWs and ±0.2 for the IRR.
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