Question

In the Rawhide Company (a leather products manufacturer), decisions regarding approval of proposals for capital investment are based upon a stipulated MARR of 18% per year. The five packaging devices listed in the table below were compared assuming a 10 year useful life and zero market value for each at that time. Which one (if any) should be selected? Use the IRR and PW method.
Packaging Equipment


Packaging Equipment


Packaging Equipment


Packaging Equipment


Packaging Equipment







A



B



C



D



E





Capital Investment



$38,000



$50,000



$55,000



$60,000



$70,000





Annual revenue less expenses



$11,000



$14,100



$16,300



$16,800



$19,200





Rate of return (IRR)



26.1%



25.3%



26.9%



25.0%



24.3%

Answer 1

C:is the right answer.