A company wants to know whether it is economically worthwhile to purchase an equ

Question

A company wants to know whether it is economically worthwhile to purchase an equipment with an initial cost of $150,000; an annual recurring cost of $20,000 over its life of 10 years; a salvage value of $20,000 at the end of its life; and an anticipated annual revenue of $40,000 in the first year, increasing by $1000 per year thereafter until year 5 after which it remains constant at the year 5 level. A major repair costing $20,000 is required in year 5.

Use the IRR method of analysis with a MARR of 20% to advise the company appropriately.

Explanation / Answer

$100000

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