Refer to the Arpegio Products Data Set. Calculate the MP3- player project€™s ARR. If the MP3 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%.

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Annual Net Cash Inflows MP3 Players s 371,500 371,500 371,500 371,500 Year DVRs S530,000 2 390,000 330,000 270,000 Total. $1.857.500 $1.545.000