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A company is considering automating its production line with the following details: Initial cost of automation: 900,000 Expected annual savings: 250,000 Life of automation system:
A company is considering automating its production line with the following details:
- Initial cost of automation: €900,000
- Expected annual savings: €250,000
- Life of automation system: 6 years
- Depreciation: Units of production method
- Salvage value: €50,000
- Discount rate: 10%
Required:
- Calculate the NPV of the automation project.
- Determine the IRR.
- Compute the payback period.
- Assess the average accounting rate of return (ARR).
- Recommend whether to proceed with automation.
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Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
