Furnace Furnace Furnace A В Initial investment $450,000 $400,000 $300,000 Annual revenues * $80,000 $10,000 $70,000 $70,000 Annual cost * $8,000 $13,000 Salvage value Life of asset $50,000 $40,000 $35,000 15 years 15 years 15 years Annual revenue and cost figures are increases over the "do nothing" alternative.
Furnace Furnace Furnace A В Initial investment $450,000 $400,000 $300,000 Annual revenues * $80,000 $10,000 $70,000 $70,000 Annual cost * $8,000 $13,000 Salvage value Life of asset $50,000 $40,000 $35,000 15 years 15 years 15 years Annual revenue and cost figures are increases over the "do nothing" alternative.
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
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 12% per year.
Transcribed Image Text:Furnace Furnace
Furnace
A
В
Initial investment
$450,000 $400,000
$300,000
Annual revenues *
$80,000
$10,000
$70,000
$70,000
Annual cost *
$8,000
$13,000
Salvage value
Life of asset
$50,000
$40,000
$35,000
15 years 15 years
15 years
Annual revenue and cost figures are increases over the
"do nothing" alternative.
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