Problem 3. Calculate the PW and IRR of this transaction. At the given MARR is this a good purchase? Please workout in excel spreadsheet. Annual Recurring benefitsAnnual Recurring costsSalvage valueProject life = 40 years2025558182510822Select Project =Int rate = 5%Reason:Prob. 3A company is buying a machine that will save them in labor cost. Italso has some yearly maintenance costs. See the details below.Calculate the PW and IRR of this transaction. At the given MARR, isthis a good purchase?Initial Investment15000Annual Labor savingsAnnual maintenance costs80002500Salvage valueN= 6 yrs2000PW =MARR = 15%IRR =Good/BadProb. 4Consider the following two projects. Which project would you selecton the basis of rate of return, assuming MARR = 15%A1A20006-900-1200016000350034003550023004.3200280012001600Select Project =Reason:tvW20

Information Provided: Term = 6 years MARR = 15%

Answered: Calculate the PW and IRR of this…

Calculate the PW and IRR of this transaction. At the given MARR is this a good purchase? Please workout in excel spreadsheet.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter12: Capital Investment Analysis

Section: Chapter Questions

Problem 15E

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Question

Problem 3. Calculate the PW and IRR of this transaction. At the given MARR is this a good purchase? Please workout in excel spreadsheet.

Annual Recurring benefits
Annual Recurring costs
Salvage value
Project life = 40 years
20
25
55
8
18
25
10
8
22
Select Project =
Int rate = 5%
Reason:
Prob. 3
A company is buying a machine that will save them in labor cost. It
also has some yearly maintenance costs. See the details below.
Calculate the PW and IRR of this transaction. At the given MARR, is
this a good purchase?
Initial Investment
15000
Annual Labor savings
Annual maintenance costs
8000
2500
Salvage value
N= 6 yrs
2000
PW =
MARR = 15%
IRR =
Good/Bad
Prob. 4
Consider the following two projects. Which project would you select
on the basis of rate of return, assuming MARR = 15%
A1
A2
0006-
900
-12000
1
6000
3500
3400
3
5500
2300
4.
3200
2800
1200
1600
Select Project =
Reason:
tv
W
20

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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