The International Parcel Service has installed a new radio frequency identificat

Question

The International Parcel Service has installed a new radio frequency identification system to help reduce the number of packages that are incorrectly delivered. The capital investment in the system is $61,000, and the projected annual savings are tabled below. The system's market value at the EOY five is negligible, and the MARR is 18% per year. What is the FW of this investment? What is the IRR of the system? What is the discounted payback period for this investment? Click the icon to view the interest and annuity table for discrete compounding when the MARR is 18% per year.

Explanation / Answer

a) FW = future value of annual savings (FS) - future value of capital investment (FC)

Future value of capital capital investment (FC)= 61000*(1+.18)^5 = $139553.22

Future value of annual savings

b) IRR is the rate at which the net present value is zero. S instead of 18% i tried with different rates on an excel sheet and found that at 40.645% the net PW is zero.

c) Discounted payback period is the no. of years the project take to break even at a given rate i.e. PW = 0 so if i calculate the present worth PW at the EOY 8, i get total PW approximately equal to 0 so discounted payback period is approx. 8 years

Year Savings Future value 4 23000 44591.89 3 31000 50933.99 2 28000 38987.20 1 42000 49560 0 45000 45000 Future value of total savings 229073.08 Net FW = (FS)-(FC) 89519.86

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.