Question
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $355,000. The manager believes
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $355,000. The manager believes that the new investment will result in direct labor savings of $71,000 per year for 10 years.
| Year | 6% | 10% | 12% | 15% | 20% |
|---|---|---|---|---|---|
| 1 | 0.943 | 0.909 | 0.893 | 0.870 | 0.833 |
| 2 | 1.833 | 1.736 | 1.690 | 1.626 | 1.528 |
| 3 | 2.673 | 2.487 | 2.402 | 2.283 | 2.106 |
| 4 | 3.465 | 3.170 | 3.037 | 2.855 | 2.589 |
| 5 | 4.212 | 3.791 | 3.605 | 3.353 | 2.991 |
| 6 | 4.917 | 4.355 | 4.111 | 3.785 | 3.326 |
| 7 | 5.582 | 4.868 | 4.564 | 4.160 | 3.605 |
| 8 | 6.210 | 5.335 | 4.968 | 4.487 | 3.837 |
| 9 | 6.802 | 5.759 | 5.328 | 4.772 | 4.031 |
| 10 | 7.360 | 6.145 | 5.650 | 5.019 | 4.192 |
a. What is the payback period on this project? fill in the blank 1 of 1 years
b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar. Net present value fill in the blank 1 of 1$
c. What else should the manager consider in the analysis?
DepreciationDepreciation and TaxesMaintenance costsTaxesTaxes and Maintenance costsTaxes and Maintenance costs
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Contemporary Auditing
Authors: Michael C. Knapp
10th edition
978-1285066608, 128506660X, 978-1305445161, 1305445163, 978-1305970816
