| | Cengage CengageNOW! Online t\' × C sjc.cengagenow.comiln Other tookmarks Adv
ID: 2555174 • Letter: #
Question
| | Cengage CengageNOW! Online t' × C sjc.cengagenow.comiln Other tookmarks Advanced Technology, Payback, NPV, IRR, Sensitivity Analysis Gina Ripley, president of Deaning Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: S300,000 Decreased waste Increased quality Decrease in operating costs Increase in on-time deliveries 600,000 The systeri will cost $9,000,000 ard last 10 years. The carpany's cost of capital is 12 percent. The present value tables provided in Exhibit 19B.1 and Exhibit 198.2 must be used to solve the following problems 1. Calculatc the payback period for thc systcm. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NMand IRR for the project. Round your ]RR answers to the noarest whole porcentage v luc for cxon ple, 15.6% rounds to 169 and should be ontorod as 16 in the answer box is negative, enter your answer as a negative valr ]f the NPV NPV 14923 12 Shauld the system be purchased-even it oes nat meet the payback criteric 3. The project manager reviewed the projected cash flows and ported out that two items had been missed. First, the System would have a salvage value, net of any tax effects, of $1,000,000 at the end of 10 years, second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of$300.000. Recalculate the payback period, NPV and IRR gren this new information. I or the lRR computation initially ignore salvage value. Round your LIAR answers to the nearest whole percentage value for example, 15.6% rounds to 16% and should be cntered ??5·16" in the ??wer box). If the NPV is negativc, cnter your answer a negative value. Payback period: NPV: 524665 IRR: % and 10m9 AM 14 16 Does the decision change?Explanation / Answer
2. Net Present Value = -525,000
3. Net Present Value = $1,492,000
"It would be appreciated if you give your feedback"
Year Cash Flow Discount Factor Present Value 0 $(9,000,000) 1.00 $(9,000,000) 1-10 $1,500,000 5.650 $8,475,000 NPV -525,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.