Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. problem 2. (20 pts). a steel fabrication plant is

Problem 2. (20 pts). A steel fabrication plant is considering investing in an automated sandblasting...

90.2K

Verified Solution

Question

Accounting

image
Problem 2. (20 pts). A steel fabrication plant is considering investing in an automated sandblasting machine to replace the manual sandblasting operation currently in place. The machine has an initial cost of $675,000, and a salvage value of $100,000 after 10 years. The cost to install the machine is $75,000 for foundations and utilities, and the annual operating cost (labor, consumables and utilities) is estimated to be $100,000/yr. The machine is expected to eliminate 2750 manual hours of sandblasting per year at a cost of $100/hr for labor and consumables. The machine will require an expenditure of $200,000 in year 5 for relining. The relining does not extend the 10 year useful life. The fabrication plant has an MARR of 15% for productivity improvement projects such as this. Calculate the IRR for this potential investment and, on that basis, recommend whether it should be implemented or not. Ignore depreciation and taxes. For full credit, show all your work, including cash flow diagram, net cash flow tables, Excel spreadsheets and Excel formulas. Use this chart from our lectures to guide you through finding i and IRR

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students