Explain your reasons for recommendation

Reference no: EM132173525

Question: An investor is about to make an investment of $45,000 in equipment that will bring a net annual income of $20,000. The equipment will last for only three years, has no resale value, and removal cost is negligible. An engineer suggests an improvement in the equipment that will cost $35,000 and will extend its life to six years but will not change the annual income. The equipment will have no resale value after the six-year life; the removal cost is again negligible. The investor has MARR of 10%. Use the rate of return method to make a recommendation to him. Explain your reasons for recommendation.

Reference no: EM132173525

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