A remotely situated fuel cell has an installed cost of $1,900 and will reduce ex

ID: 2614240 • Letter: A

Question

A remotely situated fuel cell has an installed cost of $1,900 and will reduce existing surveillance expenses by $350 per year for seven years. The border security agency's MARR is 12% per year. a. What is the minimum salvage (market) value after seven years that makes the fuel cell worth purchasing? b. What is the fuel cell's IRR if the salvage value is negligible? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. a. The minimum salvage (market) value is s (Round to the nearest cent.) b. The fuel cell IRR is 1%. (Round to two decimal places.)

Explanation / Answer

answer -1

answer -2

Year

annual savings

350

312.5

-1900

350

279.0179

350

249.1231

350

222.4313

350

198.5994

350

177.3209

350

158.3222

350

present value of annual savings

1597.315

350

less cost of machine

1900

IRR =Using IRR function in MS excel =irr(-1900,350,350,350,350,350,350,350)

6.79%

NPV

-302.685

Minimum Market value at the end of year that make fuel cell worth purchase

302.6852*(1.12^7)

669.14