Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 68

Swagelok Co. of Solon, Ohio, makes variable area flowmeters (VAFs) that measure liquid and gas flow rates by means of a tapered tube and float. If tooling and setup costs were $400,000 in year 0 and an additional $190,000 in year 3, determine the external rate of return using the modified rate of return approach. The revenue was $160,000 per year in years 1 through 10. Assume the company's MARR is 20% per year and its cost of capital is 9% per year.