Using rate of return analysis to determine if user with marr

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1. Jaguar Woodworking wants to purchase a new drill press for $81,000. The drill has a warranty that costs $450 for the first 4 years and $500 for the next 6 years. The new revenues from this drill press will be $10,000 annually. After year 10, the drill can be sold for a value of $28,000. In order to afford the drill, Jaguar takes out a loan for 80% of the value of the drill. The loan is paid back in annual payments over 5 years, starting in year 2 at the bank’s interest rate of 20%. If Jaguar uses a MARR of 5%, calculate the value of purchasing the drill press. Should Jaguar purchase the drill?

3. A firm manufactures and sells high quality printers and toners. Each printer sells for $790 and each toner for $70. The average user keeps the printer for 5 years and consumes 4 toners every year. The typical user prints approximately 3000 pages per year at a value of $0.18 per page over the first 3 years and 70% of that amount in the last 2 years they own the printer. Using rate of return analysis to determine if a user with a MARR = 2% should purchase the printer.

Reference no: EM131308079

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