OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $500,000 per year in direct labor costs. The company requires a 10% return from its investments. 1. Compute the proposed investment’s net present value. 2. Using your answer from part 1, is the investment’s internal rate of return higher or lower than 10%?
OptiLux is considering investing in an automated manufacturing system. The system requires an initial
investment of $4 million, has a 20-year life, and will have zero salvage value. If the system is implemented,
the company will save $500,000 per year in direct labor costs. The company requires a 10%
from its investments.
1. Compute the proposed investment’s
2. Using your answer from part 1, is the investment’s
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OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.6 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $700,000 per year in direct labor costs. The company requires a 12%
a. Compute the proposed investment’s net present value.
b. Using the answer from part a, is the investment’s
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