Current Attempt in Progress Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $110,000. Galvanized Products is planning to borrow 1/4th of the purchase price from a bank at 12.00% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $5,400 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $20,000 per year to maintain the system but will save $52,000 per year through increased efficiencies. Galvanized Products uses a MARR of 20.00 %/year to evaluate investments. a. What is the present worth of this investment? $ Do all calculations to 5 decimal places and round final answer to 2 decimal places. Tolerance is ± 1.00. b. What is the decision rule for judging the attractiveness of investments based on present worth? c. Should the new computer system be purchased? Click here to access the TVM Factor Table Calculator eTextbook and Media GO Tutorial Save for Later Attempts: 0 of 3 used Submit Answer

Current Attempt in Progress Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $110,000. Galvanized Products is planning to borrow 1/4th of the purchase price from a bank at 12.00% compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $5,400 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $20,000 per year to maintain the system but will save $52,000 per year through increased efficiencies. Galvanized Products uses a MARR of 20.00 %/year to evaluate investments. a. What is the present worth of this investment? $ Do all calculations to 5 decimal places and round final answer to 2 decimal places. Tolerance is ± 1.00. b. What is the decision rule for judging the attractiveness of investments based on present worth? c. Should the new computer system be purchased? Click here to access the TVM Factor Table Calculator eTextbook and Media GO Tutorial Save for Later Attempts: 0 of 3 used Submit Answer

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Galvanized Products is considering purchasing a new computer system for their enterprise data management system. The vendor has quoted a purchase price of $100,000. Galvanized Products is planning to borrow one-fourth of the purchase price from a bank at 16 percent compounded annually. The loan is to be repaid using equal annual payments over a 3-year period. The computer system is expected to last 5 years and has a salvage value of $3,000 at that time. Over the 5-year period, Galvanized Products expects to pay a technician $20,000 per year to maintain the system but will save $50,000 per year through increased efficiencies. Galvanized Products uses a MARR of 14 percent/year to evaluate investments. Using the ERR method, should the new computer system be purchased? (A) Yes B) No
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