A logistic company is considering using automated guided vehicles (AGVS) system to speed up the process and cut some costs. To implement the system, the company need to anticipates the purchasing price of the AGVS system. The system will save $1,500,000 per year in labor and operational cost. However, it will incur a maintenance cost of $400,000 per year. The system is expected to have a 15-year service life and a salvage value of about $100,000. If the company's MARR is 10%, determine the maximum price that the company should pay to purchase the AGVS system so that project is profitable.

A logistic company is considering using automated guided vehicles (AGVS) system to speed up the process and cut some costs. To implement the system, the company need to anticipates the purchasing price of the AGVS system. The system will save $1,500,000 per year in labor and operational cost. However, it will incur a maintenance cost of $400,000 per year. The system is expected to have a 15-year service life and a salvage value of about $100,000. If the company's MARR is 10%, determine the maximum price that the company should pay to purchase the AGVS system so that project is profitable.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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