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Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are: Decreased waste $ 75,000

Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are:

Decreased waste

$ 75,000

Increased quality

100,000

Decrease in operating costs

62,500

Increase in on-time deliveries

12,500

The system will cost $750,000 and will last ten years. The company's cost of capital is 10%.

Required:

What is the payback period for the flexible manufacturing system?

What is the NPV for the flexible manufacturing system?

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