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28 Sep 2019
Cash Payback Period, Net Present Value Analysis, and QualitativeConsiderations The plant manager of Shenzhen Electronics Company isconsidering the purchase of new automated assembly equipment. Thenew equipment will cost $375,000. The manager believes that the newinvestment will result in direct labor savings of $75,000 per yearfor 10 years.
Present Value of an Annuity of $1 atCompound 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 thisproject?
years
b. What is the net present value, assuming a10% rate of return? Use the table provided above. Round to thenearest whole dollar.
Net present value $
Cash Payback Period, Net Present Value Analysis, and QualitativeConsiderations The plant manager of Shenzhen Electronics Company isconsidering the purchase of new automated assembly equipment. Thenew equipment will cost $375,000. The manager believes that the newinvestment will result in direct labor savings of $75,000 per yearfor 10 years.
Present Value of an Annuity of $1 atCompound 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 thisproject?
years
b. What is the net present value, assuming a10% rate of return? Use the table provided above. Round to thenearest whole dollar.
Net present value | $ |
Casey DurganLv2
28 Sep 2019