Cash payback period, net present value analysis, and qualitative considerations The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $225,C manager believes that the new investment will result in direct labor savings of $75,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 8 4.917 4.355 4.111 7 5.582 6.210 3.785 3.326 4.868 4.564 4.160 3.605 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. What is the payback period on this project? years b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar. Net present value $ c. What else should the manager consider in the analysis? Taxes and Maintenance costs

Cash payback period, net present value analysis, and qualitative considerations The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $225,C manager believes that the new investment will result in direct labor savings of $75,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 1.833 1.736 1.690 1.626 1.528 3 2.673 2.487 2.402 2.283 2.106 4 3.465 3.170 3.037 2.855 2.589 5 4.212 3.791 3.605 3.353 2.991 6 8 4.917 4.355 4.111 7 5.582 6.210 3.785 3.326 4.868 4.564 4.160 3.605 5.335 4.968 4.487 3.837 9 6.802 5.759 5.328 4.772 4.031 10 7.360 6.145 5.650 5.019 4.192 a. What is the payback period on this project? years b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar. Net present value $ c. What else should the manager consider in the analysis? Taxes and Maintenance costs

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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