Refer to the Arpegio Products Data Set. Calculate the DVR projects ARR. If the DVR project had

Question:

Refer to the Arpegio Products Data Set. Calculate the DVR project€™s ARR. If the DVR project had a residual value of $ 100,000, would the ARR change? Explain and recalculate if necessary. Does this investment pass Arpegio€™s ARR screening rule?

Arpegio Products Data Set.
Arpegio Products is considering producing MP3 players and digital video recorders (DVRs). The products require different specialized machines, each costing $ 1 million. Each machine has a five- year life and zero residual value. The two products have different patterns of predicted net cash inflows:

Arpegio will consider making capital investments only if the payback period of the project is less than 3.5 years and the ARR exceeds8%.

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...