a). You have identified two potential investment options, with the cash Rows shown below. and aro preparing to analyze these options using an incremental gale of return approach turd the MIRR be incremental investment Assume an MARFE rate of 8% and that financing costs are at the MARR real (Enter your answer as a percentage)
|
N
|
Project 1
|
Protect 2
|
|
0
|
-1500
|
-1750
|
|
1
|
375
|
1200
|
|
2
|
700
|
150
|
b) In an effort to reduce cost and become a greener organization, ACME Corporation is interested In reducing its costs associated with the disposal of cardboard packaging from their production facility.
Currently, ACME pays a local firm $2000 per month to pick up and haul their cardboard materials to the local landfill.
The cardboard could be recycled of ACME purchases a hydraulic baler. the baler costs $62,500 and would have a useful life of 30 years.
The baler would have a negligible salvage value at the end of this period.
Operating the baler requires the following annual costs: $77,500 in labor and $2,250 for strapping material.
ACME estimates that they will produce 450 bales of cardboard per year which they would be able to sell to a local recycler for $20 per bale.
Use an annual equivalent worth method to recommend whether it is economical to install and operate the baler (i.e. determine if there is a cost advantage of investing in the baler). Assume ACME has an MARR of 9%.