Incremental ROR Analysis: 1. Two machines are being considered for purchase. If the MARR (here,...
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Accounting
Incremental ROR Analysis:
1. Two machines are being considered for purchase. If the MARR (here, the minimum required interest rate) is 10%, which machine should be bought?
| Machine X | Machine Y | |
| Initial cost | $200 | $700 |
| Uniform annual benefit | 95 | 120 |
| End-of-useful-life salvage value | 50 | 150 |
| Useful life, in years | 6 | 12 |
RoR Analysis for a Single Cash Flow:
2. Compute the exact ROR for the following cash flow. The MARR is 10%. You have to show your interpolation steps, if applicable, for complete points.
Initial Cost 300K
Annual Benefits 60K
Salvage 50K
Overhaul expenses on the 5th year 2.5K
Life 10 years
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