Whales Inc. just invested in revolutionary electrical shock technology that is guaranteed to exterminate any flying insect. The equipment cost $16,250 and has a four-year usable life. The equipment will generate $6,500 in revenue each year. The cost of operating the machine is projected to be $500 the first year and $250 per year after that. When the equipment is disposed of, it is estimated to be worth $800. The company set the MARR (ε = interest rate) at 8%. a. The Net FW of this investment = $ Blank 1 b. The Net AW = $ Blank 2 c. The Net PW = $ Blank 3
Whales Inc. just invested in revolutionary electrical shock technology that is guaranteed to exterminate any flying insect. The equipment cost $16,250 and has a four-year usable life. The equipment will generate $6,500 in revenue each year. The cost of operating the machine is projected to be $500 the first year and $250 per year after that. When the equipment is disposed of, it is estimated to be worth $800. The company set the MARR (ε = interest rate) at 8%. a. The Net FW of this investment = $ Blank 1 b. The Net AW = $ Blank 2 c. The Net PW = $ Blank 3
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Whales Inc. just invested in revolutionary electrical shock
technology that is guaranteed to exterminate any flying
insect. The equipment cost $16,250 and has a four-year
usable life. The equipment will generate $6,500 in
revenue each year. The cost of operating the machine is
projected to be $500 the first year and $250 per year
after that. When the equipment is disposed of, it is
estimated to be worth $800. The company set the MARR
(ε = interest rate) at 8%.
a. The Net FW of this investment = $ Blank 1
b. The Net AW = $ Blank 2
c. The Net PW = $ Blank 3
d. IRR = Blank 4 %
e. ERR = Blank 5 %
f. Is this purchase a wise investment? (type only Yes or
No) = Blank 6
Note: Round final answer in WHOLE NUMBER. No need to write the
Unit of Measure.
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