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Question 5.T-Y-S.A: “The higher the MARR, the higher the price that a company sh...

“The higher the MARR, the higher the price that a company should be willing to pay for equipment that reduces annual operating expenses.” Do you agree with this statement? Explain your answer. (5.2)

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No.Ahigher MARR reduces the present worth of future cash inflows created by savings (reductions) in annual operating costs. The initial investment (at time 0) is unaffected, so higher MARRs reduce the price that a company should be willing to pay for this equipment.

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