Question (3): The IPS company has installed a system to help reduce the number of defective products. The capital investment in the system is $X1, and the projected annual savings are tabled below. The system's market value at the EOY five is negligible, and the MARR is x2% per year. EOY Savings 1 25,000 2 30,000

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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X1 = 125,000 X2 = 12% *Do not use excel to solve the problem, use the equations and explain each step in details. *Draw a cash flow diagram.
Question (3): The IPS company has installed a system to help reduce the number of defective
products. The capital investment in the system is $X1, and the projected annual savings are
tabled below. The system's market value at the EOY five is negligible, and the MARR is x2%
per year.
EOY Savings
1 25,000
2
30,000
35,000
40,000
46,000
a. What is the FW of this investment? Based on economical decision rule, is this a good
investment?
3
4
5
b. What is the IRR of the system? Based on economical decision rule, is this a good
investment?
c. What is the discounted payback period for this investment?
Transcribed Image Text:Question (3): The IPS company has installed a system to help reduce the number of defective products. The capital investment in the system is $X1, and the projected annual savings are tabled below. The system's market value at the EOY five is negligible, and the MARR is x2% per year. EOY Savings 1 25,000 2 30,000 35,000 40,000 46,000 a. What is the FW of this investment? Based on economical decision rule, is this a good investment? 3 4 5 b. What is the IRR of the system? Based on economical decision rule, is this a good investment? c. What is the discounted payback period for this investment?
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