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.
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter7: Fixed Assets, Natural Resources, And Intangible Assets
Section: Chapter Questions
Problem 7.3.3MBA
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Question
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
![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5dcd44a5-3b91-4512-92f6-98e5809aaa99%2F9abe5445-c55e-49b0-8851-95c2a06e5dba%2Fyxphiv_processed.png&w=3840&q=75)
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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5dcd44a5-3b91-4512-92f6-98e5809aaa99%2F9abe5445-c55e-49b0-8851-95c2a06e5dba%2F64mfwso_processed.jpeg&w=3840&q=75)
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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