You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ɛ =12% per year, answer the following questions. a). Using AW, determine whether this proposal is acceptable.
You are faced with making a decision on a large capital investment proposal. The capital investment amount is $640,000. Estimated annual revenue at the end of each year in the eight year study period is $180,000. The estimated annual year-end expenses are $42,000 starting in year one. These expenses begin decreasing by $4,000 per year at the end of year four and continue decreasing through the end of year eight. Assuming a $20,000 market value at the end of year eight and a MARR = ɛ =12% per year, answer the following questions. a). Using AW, determine whether this proposal is acceptable.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 3E
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![You are faced with making a decision on a large capital investment proposal. The capital
investment amount is $640,000. Estimated annual revenue at the end of each year in the
eight year study period is $180,000. The estimated annual year-end expenses are
$42,000 starting in year one. These expenses begin decreasing by $4,000 per year at
the end of year four and continue decreasing through the end of year eight. Assuming a
$20,000 market value at the end of year eight and a MARR = = =12% per year, answer
the following questions.
a). Using AW, determine whether this proposal is acceptable.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F451afc1a-854b-4eac-a6da-2c751809548d%2Fd093ff49-38e4-48b0-85cb-44c94c1baf7a%2F0898ekw_processed.png&w=3840&q=75)
Transcribed Image Text:You are faced with making a decision on a large capital investment proposal. The capital
investment amount is $640,000. Estimated annual revenue at the end of each year in the
eight year study period is $180,000. The estimated annual year-end expenses are
$42,000 starting in year one. These expenses begin decreasing by $4,000 per year at
the end of year four and continue decreasing through the end of year eight. Assuming a
$20,000 market value at the end of year eight and a MARR = = =12% per year, answer
the following questions.
a). Using AW, determine whether this proposal is acceptable.
![b). What is the ERR of this proposal? Is it acceptable?
c). What is the IRR of this proposal? Is it acceptable?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F451afc1a-854b-4eac-a6da-2c751809548d%2Fd093ff49-38e4-48b0-85cb-44c94c1baf7a%2Fu7z9rd9_processed.png&w=3840&q=75)
Transcribed Image Text:b). What is the ERR of this proposal? Is it acceptable?
c). What is the IRR of this proposal? Is it acceptable?
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