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Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 11% per year.

Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 11% per year.

Essentials Of Investments
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
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Fiesta Foundry is considering a new furnace that will allow them to be more productive. Three alternative furnaces are under consideration. Perform an incremental analysis of these alternatives using the IRR method for each increment of cash flows. The MARR is 11% per year.

Furnace A Furnace B Furnace C $440,000 $70,000 Initial investment $310,000 $70,000 $240,000 $80,000 Annual revenues * Annual cost Salvage value $14,000 $50,000 20 years $5,000 $40,000 $11,000 $35,000 20 years 20 years * Annual revenue and cost figures are increases over the "do nothing" alternative (DN). Life of asset
Transcribed Image Text:Furnace A Furnace B Furnace C $440,000 $70,000 Initial investment $310,000 $70,000 $240,000 $80,000 Annual revenues * Annual cost Salvage value $14,000 $50,000 20 years $5,000 $40,000 $11,000 $35,000 20 years 20 years * Annual revenue and cost figures are increases over the "do nothing" alternative (DN). Life of asset
Perform the incremental PW Analysis. Fill-in the table below (Hint: Order alternatives by increasing capital investment). (Round to the nearest dollar.) Incremental Investment Inc. PW Alternative to be selected A(C DN) Furnace C A(B Furnace C A(A Furnace C
Transcribed Image Text:Perform the incremental PW Analysis. Fill-in the table below (Hint: Order alternatives by increasing capital investment). (Round to the nearest dollar.) Incremental Investment Inc. PW Alternative to be selected A(C DN) Furnace C A(B Furnace C A(A Furnace C
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