An industrial company is considering starting a project to redesign and improve a production line that is currently operating in its factory. The company is expected to invest an initial amount of SAR 200,000 to improve the production line and is expected to spend another SAR 44,000 annually for the first four (4) years. The improved production line project is expected to generate revenues of SAR 140,000 in the first year, SAR 190,000 in the second year, SAR 280,000 in the third year, and another SAR 350,000 in the fourth year. Knowing that the discount rate is 8% or 0.08. Calculate the net present value [NPV] and return on investment [ROI] for the project and assess whether the results of the financial analyzes for this project motivate the project to move forward.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter5: Network Models
Section5.3: Assignment Models
Problem 18P
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An industrial company is considering starting a project to redesign and improve a production line
that is currently operating in its factory. The company is expected to invest an initial amount of SAR
200,000 to improve the production line and is expected to spend another SAR 44,000 annually for
the first four (4) years. The improved production line project is expected to generate revenues of
SAR 140,000 in the first year, SAR 190,000 in the second year, SAR 280,000 in the third year, and
another SAR 350,000 in the fourth year. Knowing that the discount rate is 8% or 0.08.
Calculate the net present value [NPV] and return on investment [ROI] for the project and assess
whether the results of the financial analyzes for this project motivate the project to move forward.
Transcribed Image Text:An industrial company is considering starting a project to redesign and improve a production line that is currently operating in its factory. The company is expected to invest an initial amount of SAR 200,000 to improve the production line and is expected to spend another SAR 44,000 annually for the first four (4) years. The improved production line project is expected to generate revenues of SAR 140,000 in the first year, SAR 190,000 in the second year, SAR 280,000 in the third year, and another SAR 350,000 in the fourth year. Knowing that the discount rate is 8% or 0.08. Calculate the net present value [NPV] and return on investment [ROI] for the project and assess whether the results of the financial analyzes for this project motivate the project to move forward.
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