Harold and Mavone plan to purchase furniture, appliances, some heirloom artifacts, as well as new woodworking and pottery-making equipment to furnish a renovated heritage home in Brazos de Dios, Texas, that they have recently purchased. The hobby equipment is a questionable purchase economically, since the couple plans to sell their artifacts online for a secondary retirement income. Estimates have been developed using two vendors for hobby enthusiasts that provide equipment and marketing services on contract. Note that the vendor's contract periods vary. If the hoped-for MARR is 20% per year, determine which vendor, or neither, should be selected using an incremental ROR analysis. Solve using spreadsheet functions. Vendor Hobby-Tru (H) Knack's (K) Initial cost, $ -12,000 -24,500 M&O costs, $/year –10,000 –8,500 Revenue, $/year 15,000 17,000 Resale value, $ 500 1,000 Contract life, years 3 6 The IRR of Hobby-Tru is 4 Numeric Response 1.Edit Unavailable. 4 incorrect.%. The IRR of Knack's is 26 Numeric Response 2.Edit Unavailable. 26 correct.%. Knack's Correctalternative is selected.
Harold and Mavone plan to purchase furniture, appliances, some heirloom artifacts, as well as new woodworking and pottery-making equipment to furnish a renovated heritage home in Brazos de Dios, Texas, that they have recently purchased. The hobby equipment is a questionable purchase economically, since the couple plans to sell their artifacts online for a secondary retirement income. Estimates have been developed using two vendors for hobby enthusiasts that provide equipment and marketing services on contract. Note that the vendor's contract periods vary. If the hoped-for MARR is 20% per year, determine which vendor, or neither, should be selected using an incremental ROR analysis. Solve using spreadsheet functions. Vendor Hobby-Tru (H) Knack's (K) Initial cost, $ -12,000 -24,500 M&O costs, $/year –10,000 –8,500 Revenue, $/year 15,000 17,000 Resale value, $ 500 1,000 Contract life, years 3 6 The
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