ACME Products has the option to invest in one of the following two conveyor systems. MARR is 15%.Conveyor System 1$350,000$84,900$101,150Conveyor System 2$380,000$92,500Capital InvestmentNet Annual Revenues$104,0506 YearsResidual ValueStudy Period6 Yearsa) Use PW, AW, and FW analyses to demonstrate which equipment is a better choice. Solve this problemmanually and show all steps and interpretations. b) Which conveyor system is preferable if Conveyor System 2 has a slightly higher risk of failure anddowntime, why?

GIVEN, SYSTEM 1 initial investment =$350,000 annual cashflow= $84,900 life = 6 years salvage value…

ACME Products has the option to invest in one of the following two conveyor systems. MARR is 15%. Conveyor System 1 $350,000 $84,900 $101,150 6 Years Conveyor System 2 $380,000 $92,500 Capital Investment Net Annual Revenues $104,050 6 Years Residual Value Study Period a) Use PW, AW, and FW analyses to demonstrate which equipment is a better choice. Solve this problem manually and show all steps and interpretations.

ACME Products has the option to invest in one of the following two conveyor systems. MARR is 15%. Conveyor System 1 $350,000 $84,900 $101,150 6 Years Conveyor System 2 $380,000 $92,500 Capital Investment Net Annual Revenues $104,050 6 Years Residual Value Study Period a) Use PW, AW, and FW analyses to demonstrate which equipment is a better choice. Solve this problem manually and show all steps and interpretations.

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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Question

ACME Products has the option to invest in one of the following two conveyor systems. MARR is 15%.
Conveyor System 1
$350,000
$84,900
$101,150
Conveyor System 2
$380,000
$92,500
Capital Investment
Net Annual Revenues
$104,050
6 Years
Residual Value
Study Period
6 Years
a) Use PW, AW, and FW analyses to demonstrate which equipment is a better choice. Solve this problem
manually and show all steps and interpretations.

b) Which conveyor system is preferable if Conveyor System 2 has a slightly higher risk of failure and
downtime, why?

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