Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $100,000 first cost. A similar one with many extra features, B has a $440,000 first cost. A will save$50,000 per year over the cutter currently in use. B will save $150,000 per year. Each clicker cutter will last five years. If the MARR is 9 percent, which alternative isbetter? Use an IRR comparison Answer the following question: For the increment from the do-nothing alternative to cutter A, the IRR is: enter your response here percent. For the increment from cutter A to cutter B, the IRR is : enter your response here percent. Therefore, neither cutter/cutter B/cutter A should be chosen.
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $100,000 first cost. A similar one with many extra features, B has a $440,000 first cost. A will save$50,000 per year over the cutter currently in use. B will save $150,000 per year. Each clicker cutter will last five years. If the MARR is 9 percent, which alternative isbetter? Use an IRR comparison Answer the following question: For the increment from the do-nothing alternative to cutter A, the IRR is: enter your response here percent. For the increment from cutter A to cutter B, the IRR is : enter your response here percent. Therefore, neither cutter/cutter B/cutter A should be chosen.
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
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a
$100,000 first cost. A similar one with many extra features, B has a $440,000 first cost. A will save$50,000
per year over the cutter currently in use. B will save $150,000 per year.Each clicker cutter will last five years.
If the MARR is 9 percent, which alternative isbetter? Use an IRR comparison
Answer the following question:
For the increment from the do-nothing alternative to
cutter A, the IRR is: enter your response here percent.
For the increment from cutter A to cutter B, the IRR is : enter your response here percent. Therefore,
neither cutter/cutter B/cutter A should be chosen.
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