Question 4: [8 Marks] You are faced with a decision on an investment proposal. Specifically, the...
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Question 4: [8 Marks] You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $180,000 per year; the initial investment costs are $640,000; and the estimated annual costs are $44,000, which begin decreasing by $4,000 per year starting at the end of the second year. Assume an 8- year analysis period, no salvage value, and MARR = 15%. (a) What is the IRR of this proposal? Is it a profitable investment? (Use i = 20% as an initial guess) (b) What are the simple and compounded payback periods at i= MARR? Question 4: [8 Marks] You are faced with a decision on an investment proposal. Specifically, the estimated additional income from the investment is $180,000 per year; the initial investment costs are $640,000; and the estimated annual costs are $44,000, which begin decreasing by $4,000 per year starting at the end of the second year. Assume an 8- year analysis period, no salvage value, and MARR = 15%. (a) What is the IRR of this proposal? Is it a profitable investment? (Use i = 20% as an initial guess) (b) What are the simple and compounded payback periods at i= MARR?
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Related Book For
Management Science The Art of Modeling with Spreadsheets
ISBN: 978-1118582695
4th edition
Authors: Stephen G. Powell, Kenneth R. Baker
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