A new instrument capable of performing 40,000 tests per year has a purchase price of $15,000,000. The
Fantastic news! We've Found the answer you've been seeking!
Question:
A new instrument capable of performing 40,000 tests per year has a purchase price of $15,000,000. The installation will cost 10% of the purchase price. The manufacturer covers maintenance costs for the first year in the purchase price. Thereafter, it will cost $200,000 per year for a maintenance contract.
Assume the following:
- The instrument will generate added test volume at a rate of 15,000 tests in the first year, and this amount will increase annually by 10,000 tests/year.
- You can charge $250 per test.
- The collection rate is 80%.
- You will be able to reduce the workforce by 10 FTEs, each of which is paid a salary of $50,000/year.
- The fringe benefits rate for workers is 20% of the salary.
- The hurdle rate for this opportunity is 7.0%.
Use the data presented to determine:
- benefit/cost ratio
- the net present value
- the average payback period for the proposed equipment acquisition.
Then, decide whether the opportunity should be pursued and explain your reason(s).
Related Book For
Posted Date: