Two alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the Following table. The Judas The Lancelot Capital Investment Annual Revenues Annual Expenses Refurbishment Cost at EOY 5 $120,000 $50,000 $135,000 $50,000 $20,000 $0 $15,000 $0 $4,000 Market Value after 10 years $40,000 IRR 22.8% 22.6%

Two alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the Following table. The Judas The Lancelot Capital Investment Annual Revenues Annual Expenses Refurbishment Cost at EOY 5 $120,000 $50,000 $135,000 $50,000 $20,000 $0 $15,000 $0 $4,000 Market Value after 10 years $40,000 IRR 22.8% 22.6%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Two alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%. The cash flows associated with each are given in the
following table.
The Judas
The Lancelot
Capital Investment
Annual Revenues
Annual Expenses
Refurbishment Cost at EOY 5
$120,000
$50,000
$135,000
$50,000
$20,000
$0
$15,000
$0
Market Value after 10 years
$40,000
$4,000
IRR
22.8%
22.6%
Which design would you recommend to your boss? Include any calculations you need to make this decision. Explain the reasoning for your decision.

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