A spare parts agency wishes to evaluate the feasibility of acquiring a new inventory system, which...

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A spare parts agency wishes to evaluate the feasibility ofacquiring a new inventory system, which has a value of ¢ 8,500,000and a useful life of 5 years, at the end of which its residualvalue is 10% of the cost.
The current system has a book value of ¢ 3,000,000 and has 5 yearsof useful life; however, there is an offer to sell them at ¢3,500,000.
The company depreciates its fixed assets by the straight-linemethod and is in the range of 30% of income tax, with a capitalcost of 25%
With this new system there will be a saving in operatingexpenses of ¢ 900,000 per year and also a decrease in inventoriesof ¢ 250,000.
to. Determine the initial investment of the project.
b. Determine the net cash flows of the project in its timehorizon.
c. Quantify and interpret the profitability of the project. Use allmethods
analyzed.

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A spare parts agency wishes to evaluate the feasibility ofacquiring a new inventory system, which has a value of ¢ 8,500,000and a useful life of 5 years, at the end of which its residualvalue is 10% of the cost.The current system has a book value of ¢ 3,000,000 and has 5 yearsof useful life; however, there is an offer to sell them at ¢3,500,000.The company depreciates its fixed assets by the straight-linemethod and is in the range of 30% of income tax, with a capitalcost of 25%With this new system there will be a saving in operatingexpenses of ¢ 900,000 per year and also a decrease in inventoriesof ¢ 250,000.to. Determine the initial investment of the project.b. Determine the net cash flows of the project in its timehorizon.c. Quantify and interpret the profitability of the project. Use allmethodsanalyzed.