A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative

A manufacturer of automated optical inspection devices is deciding on a project to increase the productivity of the manufacturing processes. The estimated costs for the two feasible alternatives being compared are shown below. Use the internal rate of return (IRR) method to determine which alternative should be selected if the analysis period is 8 years and the company's MARR is 4% per year. Alternative M N Initial costs $30,000 $45,000 Net annual cash flow $4,500 $7,000 Life in years 8 (a) IRR of base alternative = (b) IRR of incremental cash flow = (c) Choose Alternative

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

100%

A manufacturer of automated optical inspection devices is deciding on a project to increase
the productivity of the manufacturing processes. The estimated costs for the two feasible
alternatives being compared are shown below. Use the internal rate of return (IRR) method to
determine which alternative should be selected if the analysis period is 8 years and the
company's MARR is 4% per year.
Alternative
M
N
Initial costs
$30,000
$45,000
Net annual cash flow
$4,500
$7,000
Life in years
8
8
(a) IRR of base alternative =
(b) IRR of incremental cash flow =
(c) Choose Alternative

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