Compute the simple payback period for this replacement option. Determine the discounted payback period (DPBP). It is enough if you determine in which year falls
Compute the simple payback period for this replacement option. Determine the discounted payback period (DPBP). It is enough if you determine in which year falls
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
Problem 1PS
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Transcribed Image Text:Andes, Inc. is considering the replacement of its manual material handling equipment with
autonomous vehicles at a net initial cost of $12 million. The expected annual savings in operating costs are as
shown below. MARR is 10% per year compounded annually.
End of Year
1
2
3 4 5
6
3 4.5 4.5
Annual savings (millions) | 2.25 | 2.25 | 3
Compute the simple payback period for this replacement option.
Determine the discounted payback period (DPBP). It is enough if you determine in which year
the DPBP falls.
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