A manufacturer of electronic circuit boards is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing

Question:

A manufacturer of electronic circuit boards is considering six mutually exclusive cost-reduction projects for its PC-board manufacturing plant. All have lives of 10 years and zero s. The required investment and the estimated after-tax reduction in annual disbursements for each alternative are given in Table P7.54a, along with computed rates of return on incremental investments in Table P7.54b.
TABLE P7.54a

TABLE P7.54b

If the MARR is 15%, which project would you select based on the rate of return on incremental investment?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...