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Lockheed Martin Example 1 (ERR Analysis)

Lockheed Martin Example 1 (ERR Analysis) - satellite...

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Lockheed Martin Example 1 (ERR Analysis) Lockheed Martin has secured a satellite launch contract from a European communications company that will pay them $3.9M per year for the next 8 years. To land that contract, they invested $13M in a satellite tracking system. Of that amount, $8M was paid up front and the remaining $5M was paid during the first year of operation. The annual operating costs for the
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Unformatted text preview: satellite tracking system are estimated at $0.9M per year (which includes the cost of personnel, electricity, maintenance, etc.). At the end of the contract, it is estimated that the equipment will have a salvage value of $0.5M. What is Lockheed Martin’s ERR on this project if their MARR is 15%?...
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