Unformatted text preview: estimate of the salvage value for alternative 1 have to vary so that the initial decision based on the data above would be reversed? The minimum acceptable rate of return is 10%. HINT: Note that alternatives 1 and 2 have different lives. 3. The HVAC engineer for a company constructing one of the world’s largest buildings has requested that $500,000 be spent now during construction on software and hardware to improve the efficiency of the environmental control systems. This is expected to save $10,000 per year for 10 years in energy costs and $700,000 at the end of 10 years in equipment refurbishing costs. The owner has a MARR of 5%. 3.1 Calculate the IRR of this investment. 3.2 Is this investment justified and why? 4. In your own words, define the term ‘internal rate of return.’ 5. In your own words, define the term ‘inflation.’...
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- Fall '08
- Internal rate of return, salvage value, Energy costs