A piece of new equipment has been proposed by engineers to increase theproductivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market (salvage) value of $5,000 at the end of its expected life of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the value of the additional production. Use a spreadsheet to evaluate the IRR of the proposed equipment. Is the investment a good one? Recall that the MARR is 20% per year. Create a single spreadsheet that calculates PW, FW, AW, IRR, and ERR for the proposed investment. Assume that ∈= MARR = 20% per year. Does your recommendation change if the MARR decreases to 18%? Increases to 22%?
A piece of new equipment has been proposed by engineers to increase the
productivity of a certain manual welding operation. The investment cost is $25,000, and the equipment will have a market (salvage) value of $5,000 at the end of its expected life of five years. Increased productivity attributable to the equipment will amount to $8,000 per year after extra operating costs have been subtracted from the value of the additional production. Use a spreadsheet to evaluate the
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