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 14% per year. Perform the incremental PW Analysis. Fill-in the table below (Hint: Order alternatives by increasing capital investment). (Round to the nearest dollar.)IncrementalInvestmentInc. PWAlternative to be selectedA(CDN)Furnace CA(BFurnace CA(AFurnace C Furnace AFurnace BFurnace C$440,000$70,000Initial investment$310,000$70,000$240,000$80,000Annual revenues *Annual costSalvage value$14,000$50,00020 years$5,000$40,000$11,000$35,00020 years20 years* Annual revenue and cost figures are increases over the "do nothing" alternative (DN).Life of asset

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 14% per year.

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

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

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