A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR thn inuortmr ill ho oronom iuctifiod
A design firm is considering investing in a software suite that costs $200,000. It estimates that the software will allow it to better present its design ideas and generate an additional revenue of $70,000 per year for each of the next 4 years. At the end of those 4 years, the firm will need to upgrade its software and the software suite would have negligible salvage value. Due to changes in the economy, the design firm is reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate the present worth at each of these MARRS, and determine for which values of the MARR thn inuortmr ill ho oronom iuctifiod
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...
Related questions
Question
1
![A design firm is considering investing in a software suite that costs $200,000. It
estimates that the software will allow it to better present its design ideas and generate
an additional revenue of $70,000 per year for each of the next 4 years. At the end of
those 4 years, the firm will need to upgrade its software and the software suite would
have negligible salvage value. Due to changes in the economy, the design fırm is
reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate
the present worth at each of these MARRS, and determine for which values of the MARR
the investment will be economically justified.
Click here to access the TVM Factor Table calculator.
$4
PW(9%):
PW(12%):
$4
PW(14%):
Justified when MARR is
%.
Carry all interim calculations to 5 decimal places and then round your final answers for
the PWs to a whole number and for the IRR to 1 decimal place. The tolerance is ±20 for
the PWs and ±0.2 for the IRR.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe7349b69-de22-422b-b09a-b6195fee2f44%2F3c49baf4-f9e3-4241-a7ab-2272d57a7c93%2Flcscgq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A design firm is considering investing in a software suite that costs $200,000. It
estimates that the software will allow it to better present its design ideas and generate
an additional revenue of $70,000 per year for each of the next 4 years. At the end of
those 4 years, the firm will need to upgrade its software and the software suite would
have negligible salvage value. Due to changes in the economy, the design fırm is
reevaluating its MARR - it is not sure whether it should be 9%, 12%, or 14%. Calculate
the present worth at each of these MARRS, and determine for which values of the MARR
the investment will be economically justified.
Click here to access the TVM Factor Table calculator.
$4
PW(9%):
PW(12%):
$4
PW(14%):
Justified when MARR is
%.
Carry all interim calculations to 5 decimal places and then round your final answers for
the PWs to a whole number and for the IRR to 1 decimal place. The tolerance is ±20 for
the PWs and ±0.2 for the IRR.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Excel Applications for Accounting Principles](https://www.bartleby.com/isbn_cover_images/9781111581565/9781111581565_smallCoverImage.gif)
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Excel Applications for Accounting Principles](https://www.bartleby.com/isbn_cover_images/9781111581565/9781111581565_smallCoverImage.gif)
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College