It is planning to reduce its labor costs by automating a critical task that is...
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It is planning to reduce its labor costs by automating a critical task that is currently performed manually. The cost to purchase a new machine is $15,000. The installation of machine can reduce annual labor cost by $4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero. The required rate of return of Smart Manufacturing Company is 25%. a) Will you go ahead with this project A? Explain. b) Will you go ahead with this project B? Explain. c) What about if these two projects are two mutually exclusive ones? d) Will IRR and NPV always give you the same results?
It is planning to reduce its labor costs by automating a critical task that is currently performed manually. The cost to purchase a new machine is $15,000. The installation of machine can reduce annual labor cost by $4,200. The life of the machine is 15 years. The salvage value of the machine after fifteen years will be zero. The required rate of return of Smart Manufacturing Company is 25%.
a) Will you go ahead with this project A? Explain.
b) Will you go ahead with this project B? Explain.
c) What about if these two projects are two mutually exclusive ones?
d) Will IRR and NPV always give you the same results?
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