Question
1. Your company is considering investing in an automation system for its production line, in order to have savings in salaries. Obtain the Net Cash
1. Your company is considering investing in an automation system for its production line, in order to have savings in salaries. Obtain the Net Cash Flow for this project, calculate its Net Present Value and Internal Rate of Return considering the following data:
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Cost of the automation system hardware: $250,000
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Shipping cost of the hardware: $25,000
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Cost of the automation system software: $75,000
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Necessary adaptations to the facilities: $50,000
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New operators needed: 3
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Cost of initial training: $10,000 per operator
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Salaries of each of the new operators: $1,500 per month
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Salaries of each of the current workers: $1,000 per month
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Current workers that are not going to be needed any more: 10
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Hiring costs of new operators: $500 per operator
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Firing costs of current workers: $1,000 per worker
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Electricity used by the system: 250 kWh per month
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Cost of electricity: $2.5 per kWh
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Maintenance cost of the system: $2,500 per year
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Useful life of the system: 10 years
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Salvage value: $50,000
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MARR = 18% per year
Is this investment justified?
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