CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for the equipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and $85,000 at the end of each year for the next 10 years. Complete parts (a) and (b) below. a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach. Considering the alternatives in the order of lowest first cost, the best option is the which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life
with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for the
equipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and S85,000 at the end of each year for the next
10 years. Complete parts (a) and (b) below.
a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach.
Considering the alternatives in the order of lowest first cost, the best option is the
which has an incremental rate of return of %.
(Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)
Transcribed Image Text:CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $950,000. The second is to pay for the equipment in 10 equal installments of $125,000 each, starting one year from now. The third is to pay $210,000 now and S85,000 at the end of each year for the next 10 years. Complete parts (a) and (b) below. a. Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach. Considering the alternatives in the order of lowest first cost, the best option is the which has an incremental rate of return of %. (Type an integer or decimal rounded to two decimal places as needed. Use an approximate ERR if the IRR cannot be used.)
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Present Worth
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education