Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are: Decreased waste $ 75,000 Increased quality 100,000 Decrease in operating costs 62,500 Increase in on-time deliveries 12,500 The system will cost $750,000 and will last ten years. The company's cost of capital is 10%. Required: A. What is the payback period for the flexible manufacturing system? B. What is the NPV for the flexible manufacturing system?
Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are: Decreased waste $ 75,000 Increased quality 100,000 Decrease in operating costs 62,500 Increase in on-time deliveries 12,500 The system will cost $750,000 and will last ten years. The company's cost of capital is 10%. Required: A. What is the payback period for the flexible manufacturing system? B. What is the NPV for the flexible manufacturing system?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...
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Barker Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are:
Decreased waste |
$ 75,000 |
Increased quality |
100,000 |
Decrease in operating costs |
62,500 |
Increase in on-time deliveries |
12,500 |
The system will cost $750,000 and will last ten years. The company's cost of capital is 10%.
Required:
A. | What is the payback period for the flexible manufacturing system? |
B. | What is the NPV for the flexible manufacturing system? |
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