Determine equipment purchase yields a minimum 15% return, Civil Engineering

Assignment Help:

A contractor established a policy to purchase equipment over leasing only if the return is a minimum of 15%. Given the following conditions, the contractor's decision based on the policy reveals that:

1401_Calculate equipment purchase yields.png

a. The equipment purchase yields a minimum 15% return

b. The equipment purchase yields less than a minimum 15% return

c. The purchase yields a neutral or $0 return

d. Cannot be determined without additional information

Solution:

The contractor's goal is to accept a purchase with Internal Rate of Return (IRR) larger than the discount rate in which he can borrow money. The first step is to identify the rate of return on the investment. An example would be to use a geometrically rising series of values.  

 A typical means of computing IRR is to identify the discount rate that sets the Net Present Value (NPV) to $ 0 (zero dollars).  

 Applying the concept yields an Internal Rate of Return (IRR) that must satisfy the Contractor's goal.

 Find the NPV using a 15% IRR by establishing a zero sum equation  

  $0  = - $20,000 + $5,600 (P/A, IRR%, 5) +  $4,000 (P/F, IRR%, 5)

 $0 = +$760   

Therefore, $0 IRR = $760 which is > 15% IRR; the purchase is justified.


Related Discussions:- Determine equipment purchase yields a minimum 15% return

Function of reinforced concrete infill, Function of reinforced concrete inf...

Function of reinforced concrete infill in marine piling system of steel tubular pile with reinforced concrete infill Reinforced concrete is designed to fill void space inside

Show the earth pressure on abutment, Q. Show the Earth pressure on abutment...

Q. Show the Earth pressure on abutment? The magnitude of earth pressure coefficient in calculating the earth pressure on bridge abutment reliesconsiderably on the degree of res

Precaution of damp, i need simple ans for this question tell me precaution ...

i need simple ans for this question tell me precaution of dampness

How to design banks, Q. How to design banks? When approach banks are of...

Q. How to design banks? When approach banks are of medium height upto 3 m, the material may be homogeneous. For bigger heights zoned section with impervious core and pervious o

Functions of water stops in joints of box culverts, Question What will func...

Question What will functions of water stops in joints of box culverts and drainage channels ? Answer Principal function of water stops is to stop liquids, water-borne materials

Embankment, Describe the various steps in embankment construction.

Describe the various steps in embankment construction.

Write short note on open foundation, Q. Write short note on Open Foundation...

Q. Write short note on Open Foundation? Broadly the foundation are classified into open i.e. shallow & deep foundations open as stated are shallow foundation where the soil str

Site plan, can I have some help with a site plan. I want it on autocad, I h...

can I have some help with a site plan. I want it on autocad, I have all the dimmension

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd