An industrial engineer proposed the purchaseof RFID Fixed-Asset Tracking System for the company’s warehouse and weave rooms. The engineerfelt that the purchase would provide a better systemof locating cartons in the warehouse by recording thelocations of the cartons and storing the data in thecomputer. The estimated investment, annual operating and maintenance costs, and expected annual savings are as follows.• Cost of equipment and installation: $85,500• Project life: 6 years• Expected salvage value: $5,000• Investment in working capital (fully recoverable atthe end of the project life): $15,000• Expected annual savings on labor and materials:$65,800• Expected annual expenses: $9,150• Depreciation method: five-year MACRSThe firm’s marginal tax rate is 35%.(a) Determine the net after-tax cash flows over theproject life.(b) Compute the IRR for this investment.(c) At MARR = 18%, is the project acceptable?
An industrial engineer proposed the purchase
of RFID Fixed-Asset Tracking System for the company’s warehouse and weave rooms. The engineer
felt that the purchase would provide a better system
of locating cartons in the warehouse by recording the
locations of the cartons and storing the data in the
computer. The estimated investment, annual operating and maintenance costs, and expected annual savings are as follows.
• Cost of equipment and installation: $85,500
• Project life: 6 years
• Expected salvage value: $5,000
• Investment in working capital (fully recoverable at
the end of the project life): $15,000
• Expected annual savings on labor and materials:
$65,800
• Expected annual expenses: $9,150
•
The firm’s marginal tax rate is 35%.
(a) Determine the net after-tax cash flows over the
project life.
(b) Compute the
(c) At MARR = 18%, is the project acceptable?
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