15-23: A potential project is described monetarily in the table below:

First Cost

Annual Benefits

Life (years)

Salvage Value

$250,000

$75,000

4

$30,000

Additionally, the product of the project is a new type of heart valve. It will be sold by a heart pacemaker manufacturer. Often, the pacemaker recipients also need a heart valve.

a) Based on the example risk-adjusted interest rates for manufacturing projects shown in Table 15-2, which of those interest rates should be used to evaluate whether this project should be done or not?

Answer:

Reasoning:

b) What is the irr of this project?

Answer:

Reasoning:

c) Should this project be done?

Answer:

Reasoning:

4590 40% 35% 30% 25% 20% 15% 10% 5% I Budget Limit 1.2 million 18%)Opportunity Cost Projeqt Number 24 3 5 16 8 97110 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 Cumulative Investment (x1000)