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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 pay $175,000 now and $100,000 at the end of each year for the next 10 years. The second is to pay for the equipment in 10 equal installments of $140,000 each, starting one year from now. The third is to pay $725,000 now.

i) Which alternative should CB choose if their MARR is 15% per year? Use an IRR comparison approach.

ii) Below what MARR does it make sense for CB to buy the equipment now for $725,000?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M969131

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