A plasma are furnace has an internal combustion temperature of 7, 000 degree C and is being considered for the incineration of medical wastes at a local hospital. The initial investment is $299, 000 and annual revenues are expected to be $179, 000 over the six-year life of the furnace. Annual expenses will be $105, 000 at the end of year one and will increase by $5, 000 each year thereafter. The resale value of the furnace after six years is $21.000. a. What is the simple payback period of the furnace? b. What is the internal rate of return on the furnace?
a. The simple payback period of the furnace is years.