Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $140,000 first cost. A similar one with many extra features, B has a $569,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which altemative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore, should be chosen.
Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a $140,000 first cost. A similar one with many extra features, B has a $569,000 first cost. A will save $50,000 per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five years. If the MARR is 8 percent, which altemative is better? Use an IRR comparison. For the increment from the do-nothing alternative to cutter A, the IRR is percent. For the increment from cutter A to cutter B, the IRR is percent. Therefore, should be chosen.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Fantastic Footwear can invest in one of two different automated clicker cutters. The first, A, has a
$140,000 first cost. A similar one with many extra features, B has a $569,000 first cost. A will save $50,000
per year over the cutter currently in use. B will save $160,000 per year. Each clicker cutter will last five
years. If the MARR is 8 percent, which altemative is better? Use an IRR comparison.
For the increment from the do-nothing alternative to cutter A, the IRR is__ percent. For the increment
from cutter A to cutter B, the IRR is_percent. Therefore, ____ should be chosen.
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