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Lean Produ × N Netflix >. D Auto Leaf × M Inbox (655 × G ford 9000. ×/OQuz: EEH × cle secure! https://oregonstate.instructure.com/courses/1648905/quizzes/2397507/take old grinde X how to scr X Ch 99 Stu x D Question 1 0.65 pts Oregon State University Food Processors International is trying to find a new turkey processing system. They have had two options presented to them, but are having a difficult time making a decision. Both turkey processing systems have a lifespan of 10 years. The company uses a MARR of 8% to make financial decisions. The Bird3500X system has a first cost of $135,000, annual expenses of $60,000, annual savings of $80,000, and a salvage value of $5,000 at the end of the 10 years. The Plucky Time system has a first cost of $200,000, annual expenses of $80,000, annual savings of $110,000, and a salvage value of zero at the end of the 10 years What is the incremental ROR for the two alternatives? Courses 28 Groups Enter your answer without a % sign and use 2 decimal places. For example, if you calculate 5.75%, enter it as 5.75 If using Excel, be sure to format your answer for 2 decimal places. Calenda Inbox

Explanation / Answer

Find the increment of Plucky time over Bird3500X

Increment (P - B)

0 = -200000 + 135000 + (110,000 - 80,000 - (80,000 - 60,000))(P/A, i%, 10) + (0 - 5000)(P/F, i%, 10)

0 = -65000 + 10000(P/A, i%, 10) - 5000(P/F, i%, 10)

From trial and error, we find that the interest rate lies between 7% and 8%

Interpolation gives ROR = 7% + (8% - 7%)*(NPV(7%)/NPV(7%) - NPV(8%))

= 7% + 1%*(2694.07/(2694.07+215.15))

Incremental ROR = 7.92%

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