Question
Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly
Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations
The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $192,000. The manager believes that the new investment will result in direct labor savings of $64,000 per year for 10 years.
Present Value of an Annuityof $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.99164.9174.3554.1113.7853.32675.5824.8684.5644.1603.60586.2105.3354.9684.4873.83796.8025.7595.3284.7724.031107.3606.1455.6505.0194.192
a.What is the payback period on this project?
years
b.What is the net present value, assuming a 12% rate of return? Use the table provided above. Round to the nearest whole dollar.
Net present value$
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Cost Management Measuring Monitoring And Motivating Performance
Authors: Leslie G. Eldenburg, Susan K. Wolcott
2nd Edition
392
