The Ford Construction Company is considering acquiring a new earthmover. The mover's basic price is $90,000, and
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(a) Is this project acceptable, based on the most likely estimates given?
(b) Suppose that the project will require an increase in net working capital (spare-parts inventory) of $5,000, which will be recovered at the end of year 4. Taking this new requirement into account, would the project still be acceptable?
(c) If the firm's MARR is increased to 18% and with the working capital requirement from (b) not in effect, what would be the required savings in labor so that the project remains profitable? 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...
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