Proposed equipment has ten-year life with no scrap value

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Reference no: EM131165492

CB Electronix must buy a piece of equipment to place electronic components on the printed circuit boards it assembles. The proposed equipment has a 10-year life with no scrap value. The supplier has given CB several purchase alternatives. The first is to purchase the equipment for $850 000. The second is to pay for the equipment in 10 equal installments of $135 000 each, starting one year from now. The third is to pay $200 000 now and $95 000 at the end of each year for the next 10 years. (a) Which alternative should CB choose if its MARR is 11 percent per year? Use an IRR comparison approach. (b) Below what MARR does it make sense for CB to buy the equipment now for $850 000?

Reference no: EM131165492

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