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Assume that United Technologies is evaluating a proposal to change the company's manual design system to a computer - aided design ( CAD ) system.
Assume that United Technologies is evaluating a proposal to change the company's manual design system to a computeraided design CAD system. The proposed system is expected to save design hours per year; an operating cost savings of $ per hour. The annual cash expenditures of operating the CAD system are estimated to be $ The CAD system requires an initial investment of $ The estimated life of this system is five years with no salvage value. The tax rate is percent, and United Technologies uses straightline depreciation for tax purposes. United Technologies has a cost of capital of percent.
a Compute the annual aftertax cash flows related to the CAD project.
Answer: $
b Compute each of the following for the project:
Payback period. Round your answer to decimal places.
Answer: years
Net present value. Round answer to the nearest whole number.
Answer: $
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