Work the problem in Excel Fast PC, Inc., is considering a new automated assembly
ID: 2474737 • Letter: W
Question
Work the problem in Excel
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 $5,275,000 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?
Explanation / Answer
Per Annum Income 5275000-1305000-442500= 3527500 Net Salvage Value at the end of 7 years 1200000-356250= 843750 Year Cash Flows Present Value Factor @18% Present Value 0 -12450000 1.00 -12450000.00 1 3527500 0.847 2989406.78 2 3527500 0.718 2533395.58 3 3527500 0.609 2146945.40 4 3527500 0.516 1819445.26 5 3527500 0.437 1541902.76 6 3527500 0.370 1306697.25 7 4371250 0.314 1372244.80 Net Present Value 1260037.83 Since the project is expected to create wealth, installing the assembly line is recommended Per Annum Income 5275000-1305000-442500= 3527500 Net Salvage Value at the end of 7 years 1200000-356250= 843750 Year Cash Flows Present Value Factor @18% Present Value 0 -12450000 1.00 -12450000.00 1 3527500 0.847 2989406.78 2 3527500 0.718 2533395.58 3 3527500 0.609 2146945.40 4 3527500 0.516 1819445.26 5 3527500 0.437 1541902.76 6 3527500 0.370 1306697.25 7 4371250 0.314 1372244.80 Net Present Value 1260037.83 Since the project is expected to create wealth, installing the assembly line is recommended
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