ABB purchased fieldbus communication equipment for a project in South Africa for $3.15 million. The net cash

Question:

ABB purchased fieldbus communication equipment for a project in South Africa for $3.15 million. The net cash flow is estimated at $500,000 per year, and a salvage value of $400,000 is anticipated regardless of when it is sold. Determine the number of years the equipment must be used to obtain payback at MARR values of

(a) 0% and 8% per year

(b) 15% and 16% per year.

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...