Reference no: EM131093192
An industrial engineer proposed the purchase of RFID Fixed-Asset Tracking System for the company’s warehouse and weave rooms. The engineer felt that the purchase would provide a better system of locating cartons in the warehouse by recording the locations of the cartons and storing the data in the computer. The estimated investment, annual operating and maintenance costs, and expected annual savings are as follows:
•Cost of equipment and installation: $115,500
•Project life: 6 years
•Expected salvage: $10,000
•Investment in working capital (fully recoverable at the end of the project life): $15,000
•Expected annual savings on labor and materials: $75,200
•Expected annual expenses: $9,300
•Depreciation method: five-year MACRS
As part of this project, the firm will take a loan of $40,000 to be repaid in three equal annual payments at 10% interest. The firm’s marginal tax rate is 35%.
a) Determine the net after-tax cash flows over the project life.
b) Compute the IRR for this investment.
c) At MARR = 15%, is the project acceptable?
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: An industrial engineer proposed the purchase of RFID Fixed-Asset Tracking System for the company’s warehouse and weave rooms. The engineer felt that the purchase would provide a better system of locating cartons in the warehouse by recording the loca..
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