Evaluate machine XYZ when MARR is 12% per year. Pertinent data are as follows:   Machine XYZ Investment cost Expected life Market (salvage) value Annual revenue Annual expenses $10,000 5 years $1,000 $8,000 $4,000 How much is the excess of the cash flow using the Annual Worth Method? Blank 1 Calculate the External Rate of Return. Blank 2  Compute the payback period of the investment. Blank 3 Would you recommend this investment? Explain briefly. Blank 4

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 6E
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Evaluate machine XYZ when MARR is 12% per year. Pertinent data are as follows:

 

Machine XYZ

Investment cost

Expected life

Market (salvage) value

Annual revenue

Annual expenses

$10,000

5 years

$1,000

$8,000

$4,000

  1. How much is the excess of the cash flow using the Annual Worth Method? Blank 1
  2. Calculate the External Rate of Return. Blank 2 
  3. Compute the payback period of the investment. Blank 3
  4. Would you recommend this investment? Explain briefly. Blank 4
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