Andrew Burr, manager of the Virginia plant, has been looking over Carsons information and believes she has missed some important benefits of implementing CIM. Burr believes that implementing CIM will reduce scrap and rework costs by $187,500 per year. The CIM equipment will take up less floor space in the factory than the old equipment, freeing up 6,000 square feet of space for a planned new research facility. Initial plans called for renting additional space for the new facility, at a cost of $25 per square foot. Calculate a revised net present value and internal rate of return using this additional information

Bramble Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: Initial equipment cost $ 7,500,000 $ 500,000 Working capital required at start-up Salvage value of existing equipment Annual operating cost savings $ 93,750 $ 1.050,000 $ 250,000 Salvage value of new equipment at end of its useful life Working capital released at end of its useful life $ 500,000 Useful life of equipment 10 years Bramble Company uses a 12% discount rate. Click here to view the factor table. Andrew Burr, manager of the Virginia plant, has been looking over Carson's information and believes she has missed some important benefits of implementing CIM. Burr believes that implementing CIM will reduce scrap and rework costs by $187,500 per year. The CIM equipment will take up less floor space in the factory than the old equipment, freeing up 6,000 square feet of space for a planned new research facility. Initial plans called for renting additional space for the new facility, at a cost of $25 per square foot. Calculate a revised net present value and internal rate of return using this additional information. (For calculation purposes, use 4 decimal places as displayed in the factor table provided and round final answer to 0 decimal places, e.g. 58,971. Round internal rate of return to 2 decimal places, e.g. 15.26%.) Net present value $ Internal rate of return % Does your recommendation change as a result of this new information? Yes e Textbook and Media Save for Later Attempts: 1 of 3 used Submit