A new inventory management system for ABC Company could be developed at a cost of$260,000.The estimated net

Question:

A new inventory management system for ABC Company could be developed at a cost of$260,000.The estimated net operating costs and estimated net benefits over six years of operationwould be:

Estimated Net Operating Costs Year Estimated Net Benefits so $260,000 7,000 42,000 9,400 78,000 2 3 11,000 82,000 14,000

a. What would the payback period be for this investment? Would it be a good or badinvestment? Why?

b. What is the ROI for this investment?

c. Assuming a 15% discount rate, what is this investment's NPV?

Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...