OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.3 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $640,000 per year in direct labor costs. The company requires a 12% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) a. Compute the proposed investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12% ? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the proposed investment's net present value. Net present value

OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $4.3 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $640,000 per year in direct labor costs. The company requires a 12% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) a. Compute the proposed investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12% ? Hint: It is not necessary to compute IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the proposed investment's net present value. Net present value

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Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...

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OptiLux is considering investing in an automated manufacturing system. The system requires an initial investment of $5.8 million, has a 20-year life, and will have zero salvage value. If the system is implemented, the company will save $760,000 per year in direct labor costs. The company requires a 10% return from its investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) a. Compute the proposed investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 10%? Complete this question by entering your answers in the tabs below. Required A Required B Compute the proposed investment's net present value. Net present value $ 0 Required A Required B >
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