An assembly operation at a software company now requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $200,000 and will have no market value at the end of the 10-year study period. Maintenance and operation expenses of the robot are estimated to be $64,000 per year. Invested capital must earn at least 12% per year. Use the IRR method to determine if the robot is a justifiable investment.
An assembly operation at a software company now requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $200,000 and will have no market value at the end of the 10-year study period. Maintenance and operation expenses of the robot are estimated to be $64,000 per year. Invested capital must earn at least 12% per year. Use the IRR method to determine if the robot is a justifiable investment.
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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An assembly operation at a software company now requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $200,000 and will have no market value at the end of the 10-year study period. Maintenance and operation expenses of the robot are estimated to be $64,000 per year. Invested capital must earn at least 12% per year. Use the IRR method to determine if the robot is a justifiable investment.
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