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Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $332,000. The manager believes that the new investment will result in direct labor savings of $83,000 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 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 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? fill in the blank 1 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 $fill in the blank 2 c.  What else should the manager consider in the analysis?

Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $332,000. The manager believes that the new investment will result in direct labor savings of $83,000 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 4.917 4.355 4.111 3.785 3.326 7 5.582 4.868 4.564 4.160 3.605 8 6.210 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? fill in the blank 1 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 $fill in the blank 2 c.  What else should the manager consider in the analysis?

Essentials Of Investments
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
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  1. Cash Payback Period, Net Present Value Analysis, and Qualitative Considerations

    The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $332,000. The manager believes that the new investment will result in direct labor savings of $83,000 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 4.917 4.355 4.111 3.785 3.326
    7 5.582 4.868 4.564 4.160 3.605
    8 6.210 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?
    fill in the blank 1 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 $fill in the blank 2

    c.  What else should the manager consider in the analysis?
     

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