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Determine the payback period

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Problem - Z Company is planning to purchase a system capable of deploying Artificial Intelligence for monitoring the company's transactions for accuracy and misuse. The expected cost of this system is $165,000, and it is expected to have a useful life of 6 years and an estimated salvage value of $26,500. The system is expected to produce cash savings of $57,000 per year in reduced labor costs and the cash operating costs to run this system are estimated to be $17,000 per year. Assuming Company X is in the new 21% tax bracket and has a minimum desired rate of return of 12% on this investment.

(a) Determine the payback period, (b) ARR, and (c) NPV (Ignoring taxes).

(b) Determine the payback period, (b) ARR, and (c) NPV (Assuming taxes).

Reference no: EM132914916

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