"An industrial engineer proposed the purchase of an RFID Fixed-Asset Tracking System for the company's warehouse...

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"An industrial engineer proposed the purchase of an RFIDFixed-Asset Tracking System for the company's warehouse and weaverooms. The engineer felt that the purchase would provide a bettersystem of locating cartons in the warehouse by recording thelocations of the cartons and storing the data in the computer. Theestimated investment, annual operating and maintenance costs, andexpected annual saving are as follows: -Cost of equipment andinstallation: $180,300 -Project life: 6 years -Expected salvage:$13,000 -Investment in working capital (fully recoverable at theend of the project life): $18,000 -Expected annual savings on laborand materials: $60,800 -Expected annual expenses: $9,100-Depreciation method: five-year MACRS As a part of this project,the firm will take a loan of $25,000 to be repaid in three equalannual payments at 13% interest. The firm's marginal tax rate is21%. Determine the IRR of the RFID system. Express your answer as apercentage rounded to the nearest tenth of a percent (i.e., 8.3%should be entered as 8.3)"

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3.8 Ratings (536 Votes)

Formula Year n 1 2 3 4 5 6 Initial investment II 180300 Savins per year S 60800 60800 60800 60800 60800 60800 Expenses per year E 9100 9100 9100 9100 9100 9100 Depreciation rate r 20 32 1920 1152 1152 576 IIr Depreciation D 3606000 5769600 See Answer

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"An industrial engineer proposed the purchase of an RFIDFixed-Asset Tracking System for the company's warehouse and weaverooms. The engineer felt that the purchase would provide a bettersystem of locating cartons in the warehouse by recording thelocations of the cartons and storing the data in the computer. Theestimated investment, annual operating and maintenance costs, andexpected annual saving are as follows: -Cost of equipment andinstallation: $180,300 -Project life: 6 years -Expected salvage:$13,000 -Investment in working capital (fully recoverable at theend of the project life): $18,000 -Expected annual savings on laborand materials: $60,800 -Expected annual expenses: $9,100-Depreciation method: five-year MACRS As a part of this project,the firm will take a loan of $25,000 to be repaid in three equalannual payments at 13% interest. The firm's marginal tax rate is21%. Determine the IRR of the RFID system. Express your answer as apercentage rounded to the nearest tenth of a percent (i.e., 8.3%should be entered as 8.3)"