-Cropiva manufactures agricultural equipment, and they are planning on introducing a new product which would require an initial investment of $8 million in assets and would produce a net annual revenue of $1.2 million over a service life of ten years. After the ten years, the product will likely become obsolete, and the assets would be sold for an estimated $0.8 million. What is the rate of return of this project? And would it be an acceptable project with the MARR = 9%?

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
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Cropiva manufactures agricultural equipment, and they are planning on introducing a new
product which would require an initial investment of $8 million in assets and would produce a net
annual revenue of $1.2 million over a service life of ten years. After the ten years, the product will likely
become obsolete, and the assets would be sold for an estimated $0.8 million. What is the rate of return
of this project? And would it be an acceptable project with the MARR = 9%?
Transcribed Image Text:Cropiva manufactures agricultural equipment, and they are planning on introducing a new product which would require an initial investment of $8 million in assets and would produce a net annual revenue of $1.2 million over a service life of ten years. After the ten years, the product will likely become obsolete, and the assets would be sold for an estimated $0.8 million. What is the rate of return of this project? And would it be an acceptable project with the MARR = 9%?
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