XLS 9-25 Net present value, internal rate of return (CMA adapted) (LO 3, 4) Harker Company manufactures automobile components for the worldwide market. The company has three large production facilities in Virginia, New Jersey, and California, which have been operating for many years. Brett Harker, vice president of production, believes it is time to upgrade operations by implementing computer-integrated manufacturing (CIM) at one of the plants. Brett has asked corporate controller Connie Carson to gather information about the costs and benefits of implementing CIM. Carson has gathered the following data: ettlezo b o r ithe divorce $6.000.000 Initial equipment cost Working capital required at start-up 1297 won or to brinn $ 500,000 Salvage value of existing equipment $ 75,000 Annual operating cost savings aos $ 900,000 Salvage value of new equipment at end of its useful life $ 100,000 Working capital released at end of its useful life ni usb 199 $ 500,000.00 Useful life of equipment up 10 years to s a b5390 216 bootlon 501 Harker Company uses a 12% discount rate. POP Toodman 1971101 1539 si mozib 8 min 2520 bisod noqtisada bre y OE 2010 To NT Required e nt value a. Calculate the net present value of Harker's proposed investment in CIM. b. Use Excel or a similar spreadsheet application to calculate the internal rate of return on Harker's proposed investment. c. Do you recommend that the company proceed with the purchase and implementation of CIM? Why or why not? d. Andrew Burr, manager of the Virginia plant, has been looking over Carson's information and believes she has missed some important benefits of implementing CIM. Burr believes that implementing CIM will reduce scrap and rework costs by $100,000 per year. The CIM equipment will take up less floor space in the factory than the old equipment, freeing up 5,000 square feet of space for a planned new research facility. Initial plans called for renting additional space for the new facility, at a cost of $30 per square foot. Calculate a revised net present value and internal rate of return using this additional information. Does your recommendation change as a result of this new information? Why or why not