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Santa is looking to automate his entire operation because his employee expenses are becoming way too high. New toy-making machines will require a $500,000,000 investment
Santa is looking to automate his entire operation because his employee expenses are becoming way too high. New toy-making machines will require a $500,000,000 investment in Year 0, and then there is an expected $100,000 annual cost for maintenance and operations. Santa currently employs 110,000 elves (according to santatracker.net) and he pays them each $500 per year (there is no minimum wage in the North Pole). With the automation, Santa will only need 10,000 elves. In Year 6, Santa will purchase an automatic sleigh for $10,000,000. Fuel for the sleigh will cost $500,000 per year. Santa's 9 reindeer will each become obsolete, saving Santa $20,000 in carrots per reindeer per year, starting in Year 7. What is the internal rate of return on this 20-year project? If Santa has a MARR of 10%, would he move forward with the automation? 07.5%, NO O 7.5%, YES O 12.3% YES O 14.2%, NO O 9.8%, NO
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