CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year lifewith no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for theequipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and S85,000 at the end of each year for the next10 years. Complete parts (a) and (b) below.a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach.Considering the alternatives in the order of lowest first cost, the best option is thewhich has an incremental rate of return of %.(Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)

Comparing the 2nd option with the 1st option, IRR (r) of the 2nd option is - 140000/r × (1-1/(1+r)10…

CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for the equipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and $85,000 at the end of each year for the next 10 years. Complete parts (a) and (b) below. a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach. Considering the alternatives in the order of lowest first cost, the best option is the which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)

CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for the equipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and $85,000 at the end of each year for the next 10 years. Complete parts (a) and (b) below. a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach. Considering the alternatives in the order of lowest first cost, the best option is the which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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