Recent technology has made possible a computerized vending machine that can grind coffee beans and brew fresh coffee on demand. The computer also makes possible such complicated functions as changing $5 and $10 bills and tracking the age of an item and then moving the oldest stock to the front of the line, thus cutting down on spoilage. With a price tag of $4,500 for each unit, Easy Snack has estimated the cash flows in millions of dollars over the product's six-year useful life, including the initial investment, as follows: N Cash Flow 0 -$201 $82 $173 $194 $185 $106 $3(a) If the firm's MARR is 18%, is this product worth marketing according to the IRR criterion?(b) If the required investment remains unchanged but the future cash flows are expected to be 10% higher than the original estimates, how much increase in IRR do you expect?(c) If the required investment has increased from $20 million to $22 million but the expected future cash flows are projected to be 10% smaller than the original estimates, how much decrease in IRR do you expect?
Recent technology has made possible a computerized vending machine that can grind coffee beans and brew fresh coffee on demand. The computer also makes possible such complicated functions as changing $5 and $10 bills and tracking the age of an item and then moving the oldest stock to the front of the line, thus cutting down on spoilage. With a price tag of $4,500 for each unit, Easy Snack has estimated the cash flows in millions of dollars over the product's six-year useful life, including the initial investment, as follows:
N Cash Flow
0 -$20
1 $8
2 $17
3 $19
4 $18
5 $10
6 $3
(a) If the firm's MARR is 18%, is this product worth marketing according to the
(b) If the required investment remains unchanged but the future cash flows are expected to be 10% higher than the original estimates, how much increase in IRR do you expect?
(c) If the required investment has increased from $20 million to $22 million but the expected future cash flows are projected to be 10% smaller than the original estimates, how much decrease in IRR do you expect?
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