Accounting

Accounting - 6.147634% Cash Flow Description Years Amount...

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Discount Rate: 12% Cash Flow Description Years Amount Factor Present Value Initiatial Equipment Cost 0 (6,000,000) 1 (6,000,000) Working Capital Required at Startup 0 (600,000) 1 (600,000) Salvage Value of Existing Equipment 0 20,000 1 20,000 Annual Operating Cost Savings 1 to 10 840,000 5.65 4,746,187 Salvage Value of Equipment at End of its Useful Life 10 200,000 0.32 64,395 Working Capital Released at End of its Useful Life 10 600,000 0.32 193,184 Net Present Value (1,576,234) a. I would not recommend that the company proceed with the purchase and implementation of CIM because NPV is negative.
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b. Internal Rate of Return:
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Unformatted text preview: 6.147634% Cash Flow Description Years Amount Factor Present Value Initiatial Equipment Cost (6,000,000) 1 (6,000,000) Working Capital Required at Startup (600,000) 1 (600,000) Salvage Value of Existing Equipment 20,000 1 20,000 Annual Operating Cost Savings 1 to 10 840,000 5.65 6,139,459 Salvage Value of Equipment at End of its Useful Life 10 200,000 0.32 110,135 Working Capital Released at End of its Useful Life 10 600,000 0.32 330,406 Net Present Value 0 c. My recommendation would not change because NPV is still negative by $34,234....
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This note was uploaded on 04/30/2008 for the course ACC 2304 taught by Professor Robinson during the Spring '08 term at Baylor.

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Accounting - 6.147634% Cash Flow Description Years Amount...

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