New computerized vending machine worth marketing

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Reference no: EM131906788

Recent technology has made possible a computerized vending machine that can grind coffee beans and brew fresh coffee on demand. The computer also makes possible such complicated functions as tracking the age of an item and then moving the oldest stock to the front of the line, thus cutting down on spoilage. Easy Snack Inc. has estimated the cash flows in thousands of dollars over the products' six-year useful life, including the initial investment, as follows:

n Net Cash Flow

0 - $200,000

1 $80,000

2 $180,000

3 $180,000

4 $180,000

5 $100,000

6 $30,000

a) What is the IRR for this investment? Use 25% and 77% interest rates.

b) Compute for ERR when e= 18%.

c) Is the new computerized vending machine worth marketing according to the IRR and ERR criterion if MARR = 18%? Justify your answer.

Reference no: EM131906788

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