Question 1 5 pts Kruber company located Tennessee is conside

Question 1 5 pts Kruber company located Tennessee is considering two different makes ofa blow molding machine for one of its automotive products. The cost data for the two alternatives are provided in table below. MARR-10%. What is ?1RR ? Machine XMachine Y Initial Cost $200K $275K Annual operating cost Benefits/ Year Salvage value Life 60K 70K 80K 100K 10K 30K 10 years 10 years 9.47 7.28 9.88 8.36

Solution

Option d: 8.36% is correct option

	Year	0	1	2	3	4	5	6	7	8	9	10
	Initial Invetsment	-200000
	Benefits		80000	80000	80000	80000	80000	80000	80000	80000	80000	80000
	Annual Operating Cost		60000	60000	60000	60000	60000	60000	60000	60000	60000	60000
	Salvage Value											10000
	Total Cash flow	-200000	20000	20000	20000	20000	20000	20000	20000	20000	20000	30000
	Year	0	1	2	3	4	5	6	7	8	9	10
	Initial Invetsment	-275000
	Benefits		100000	100000	100000	100000	100000	100000	100000	100000	100000	100000
	Annual Operating Cost		70000	70000	70000	70000	70000	70000	70000	70000	70000	70000
	Salvage Value											30000
	Total Cash flow	-275000	30000	30000	30000	30000	30000	30000	30000	30000	30000	60000
		A	B	C	D	E	F	G	H	I	J	K
1	Incremental cash flows(Differnce of Total cash flow of Machine Y -Machine X	-75000	10000	10000	10000	10000	10000	10000	10000	10000	10000	30000
	IRR	8.36%	IRR using Excel Function(A1:K1)