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Business, 22.04.2020 05:00 ivannis875

Your firm spends $400,000 per year in regular maintenance of its equipment. Due to an economic slowdown, your boss is considering forgoing these maintenance expenses for the next 3 years. If you do this, you expect you will need to spend $1.5 million in year 4 to replace failed equipment.
a. What is the IRR of the decision to forgo maintenance of the equipment?
b. Does the IRR rule work for thisdecision?
c. For what costs of capital (COC) is forgoing maintenance a good decision?

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Your firm spends $400,000 per year in regular maintenance of its equipment. Due to an economic slowd...
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