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OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.1 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $600,000 per year in direct labor costs. The company requires a 12% 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 12%?

OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.1 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $600,000 per year in direct labor costs. The company requires a 12% 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 12%?

FINANCIAL ACCOUNTING
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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OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.1 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $600,000 per year in direct labor costs. The company requires a 12% 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 12%? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the proposed investment's net present value. Net present value Jingarod Required 2 > B Next I
Transcribed Image Text:OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.1 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $600,000 per year in direct labor costs. The company requires a 12% 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 12%? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the proposed investment's net present value. Net present value Jingarod Required 2 > B Next I
OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.1 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $600,000 per year in direct labor costs. The company requires a 12% 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 12%? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using your answer from part 1, is the investment's internal rate of return higher or lower than 12%? Is the investment's internal rate of return higher or lower than 12%? < Required 1 < Prev 3 of 16 Next > "ScreenSaver app" want
Transcribed Image Text:OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.1 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $600,000 per year in direct labor costs. The company requires a 12% 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 12%? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Using your answer from part 1, is the investment's internal rate of return higher or lower than 12%? Is the investment's internal rate of return higher or lower than 12%? < Required 1 < Prev 3 of 16 Next > "ScreenSaver app" want
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