Amazon site BF13 wants to test a new label scanner on their package sorter. The initial investmer of the machine will be $2.5 million and the benefit due to cost savings will be $900,000 per year. Normal maintenance on the machine will cost $75,000 per year and they plan for major maintenance in year 7 of $500,000. At the end of the 10 year project life, they are able to sell the parts to another warehouse for $600,000. If the MARR is 11% what is the AEW of this project?
Amazon site BF13 wants to test a new label scanner on their package sorter. The initial investmer of the machine will be $2.5 million and the benefit due to cost savings will be $900,000 per year. Normal maintenance on the machine will cost $75,000 per year and they plan for major maintenance in year 7 of $500,000. At the end of the 10 year project life, they are able to sell the parts to another warehouse for $600,000. If the MARR is 11% what is the AEW of this project?
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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![Amazon site BFI3 wants to test a new label scanner on their package sorter. The initial investment
of the machine will be $2.5 million and the benefit due to cost savings will be $900,000 per year.
Normal maintenance on the machine will cost $75,000 per year and they plan for major
maintenance in year 7 of $500,000. At the end of the 10 year project life, they are able to sell the
parts to another warehouse for $600,000. If the MARR is 11% what is the AEW of this project?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa2bf64fb-5967-4cbf-93e7-d302effa4447%2Fcf7d6db2-e844-4b28-bf28-7d1f71948d1b%2F8coocea_processed.png&w=3840&q=75)
Transcribed Image Text:Amazon site BFI3 wants to test a new label scanner on their package sorter. The initial investment
of the machine will be $2.5 million and the benefit due to cost savings will be $900,000 per year.
Normal maintenance on the machine will cost $75,000 per year and they plan for major
maintenance in year 7 of $500,000. At the end of the 10 year project life, they are able to sell the
parts to another warehouse for $600,000. If the MARR is 11% what is the AEW of this project?
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