Need work done in excel and work shown Fast PC, Inc., is considering a new autom
ID: 1122384 • Letter: N
Question
Need work done in excel and work shown
Fast PC, Inc., is considering a new automated assembly line to automate assembly of tablets. The new line can be installed for $12,450,000 today and will have a life of 7 years until technological obsolescence. At the end of its 7 year life, its components will have a salvage value of $1,200,000, and it will cost $356,250 to have the line removed. The line will produce S5,275,000 additional sales capacity per year due to productivity gains. Additional technical labor cost will be $1,305,000 per year and operating and maintenance costs will be $442,500 per year. The company's MARR for this project is 18.0%. Based on net present value estimate, do you recommend installing the automated assembly line? What is the equivalent uniform annual worth and IRR of the project? 1.Explanation / Answer
Answer:
period
Initial outlay cost'
additional sales
labour and operating cost
Present value factor at 18%
present value
0
12450000
1
12450000
1
-5275000
1747500
0.847457627
-2989407
2
-5275000
1747500
0.71818443
-2533396
3
-5275000
1747500
0.608630873
-2146945
4
-5275000
1747500
0.515788875
-1819445
5
-5275000
1747500
0.437109216
-1541903
6
-5275000
1747500
0.370431539
-1306697
7
-843750
-5275000
1747500
0.313925033
-1372245
NPV @ MARR 18%
-1260038
"-" Sign shows income from project
salavage value
Salavage value less cost to incurred on removal of line
1200000-356250
843750
labour and operating cost
Labour cost + operating cost
=1305000+442500
1747500
Pv Factor @ 18%
for 0 period
1
for 1 period
=1/(1+MARR %)^1
=1/(1+18%)
=1/1.18
0.847457627
for 2 period
=1/(1+MARR%)^2
=1/(1+18%)^2
=1/(1.18)^2
0.71818443
and so till period 10
1.214271552
period
Initial outlay cost'
additional sales
labour and operating cost
Present value factor at 18%
present value
0
12450000
1
12450000
1
-5275000
1747500
0.823539017
-2905034
2
-5275000
1747500
0.678216512
-2392409
3
-5275000
1747500
0.55853776
-1970242
4
-5275000
1747500
0.459977637
-1622571
5
-5275000
1747500
0.378809531
-1336251
6
-5275000
1747500
0.311964429
-1100455
7
-843750
-5275000
1747500
0.256914879
-1123039
(0.00)
IRR
21.43%
Yes based on NPV estimate project should be accepted.
period
Initial outlay cost'
additional sales
labour and operating cost
Present value factor at 18%
present value
0
12450000
1
12450000
1
-5275000
1747500
0.847457627
-2989407
2
-5275000
1747500
0.71818443
-2533396
3
-5275000
1747500
0.608630873
-2146945
4
-5275000
1747500
0.515788875
-1819445
5
-5275000
1747500
0.437109216
-1541903
6
-5275000
1747500
0.370431539
-1306697
7
-843750
-5275000
1747500
0.313925033
-1372245
NPV @ MARR 18%
-1260038
"-" Sign shows income from project
salavage value
Salavage value less cost to incurred on removal of line
1200000-356250
843750
labour and operating cost
Labour cost + operating cost
=1305000+442500
1747500
Pv Factor @ 18%
for 0 period
1
for 1 period
=1/(1+MARR %)^1
=1/(1+18%)
=1/1.18
0.847457627
for 2 period
=1/(1+MARR%)^2
=1/(1+18%)^2
=1/(1.18)^2
0.71818443
and so till period 10
1.214271552
period
Initial outlay cost'
additional sales
labour and operating cost
Present value factor at 18%
present value
0
12450000
1
12450000
1
-5275000
1747500
0.823539017
-2905034
2
-5275000
1747500
0.678216512
-2392409
3
-5275000
1747500
0.55853776
-1970242
4
-5275000
1747500
0.459977637
-1622571
5
-5275000
1747500
0.378809531
-1336251
6
-5275000
1747500
0.311964429
-1100455
7
-843750
-5275000
1747500
0.256914879
-1123039
(0.00)
IRR
21.43%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.