FMF plans to purchase a new breed of milling machines for its operations. As it's procurement manager, Pauline, is to consider the following four options. Each of these have a useful life of 12 years with no scrap value. The company has an MARR of 14.6% Milling Machine 2 3 First Cost $98727 $157385 $203574 Annual $21195 $35971 $46010 Savings a) What is IRR for Milling Machine #1? b) What is the Incremental IRR for Milling Machine #2? c) What is the Incremental IRR for Milling Machine #3? d) Which Milling machine would be the best option?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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FMF plans to purchase a new breed of milling machines for its operations. As it's procurement
manager, Pauline, is to consider the following four options. Each of these have a useful life of 12
years with no scrap value. The company has an MARR of 14.6%
Milling
Machine
2.
3
First Cost
$98727
$157385
$203574
Annual
$21195
$35971
$46010
Savings
a)
What is IRR for Milling Machine #1?
b)
What is the Incremental IRR for Milling Machine #2?
c)
What is the Incremental IRR for Milling Machine #3?
d)
Which Milling machine would be the best option?
Transcribed Image Text:FMF plans to purchase a new breed of milling machines for its operations. As it's procurement manager, Pauline, is to consider the following four options. Each of these have a useful life of 12 years with no scrap value. The company has an MARR of 14.6% Milling Machine 2. 3 First Cost $98727 $157385 $203574 Annual $21195 $35971 $46010 Savings a) What is IRR for Milling Machine #1? b) What is the Incremental IRR for Milling Machine #2? c) What is the Incremental IRR for Milling Machine #3? d) Which Milling machine would be the best option?
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