Engineers have suggested a new piece of machinery to boost the productivity of a certain manual soldering process. The equipment will cost $25,000 to invest in, and at the conclusion of its anticipated five-year lifespan, it will be worth $5,000 in the market (as salvage). After deducting additional running expenses from the value of the higher production, the equipment's increased productivity will amount to $8,000 per year. Assume that =MARR = 20% annually. What is the ERR for the project, and is it a good project? sketch out a cash flow diagram.
Engineers have suggested a new piece of machinery to boost the productivity of a certain manual soldering process. The equipment will cost $25,000 to invest in, and at the conclusion of its anticipated five-year lifespan, it will be worth $5,000 in the market (as salvage). After deducting additional running expenses from the value of the higher production, the equipment's increased productivity will amount to $8,000 per year. Assume that =MARR = 20% annually. What is the ERR for the project, and is it a good project? sketch out a cash flow diagram.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Engineers have suggested a new piece of machinery to boost the productivity of a certain manual soldering process. The equipment will cost $25,000 to invest in, and at the conclusion of its anticipated five-year lifespan, it will be worth $5,000 in the market (as salvage). After deducting additional running expenses from the value of the higher production, the equipment's increased productivity will amount to $8,000 per year. Assume that =MARR = 20% annually. What is the ERR for the project, and is it a good project? sketch out a cash flow diagram.
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