Cash payback period, net present value analysis, and qualitative considerations The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $201,000. The manager believes that the new investment will result im direct labor savings of $67,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.870 1.626 2.283 1 2 3 4 0.943 1.833 2.673 3.465 0.909 0.893 1.736 1.690 2.402 3.037 2.487 3.170 1 2.855 0.833 1.528 2.106 2.589
Cash payback period, net present value analysis, and qualitative considerations The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $201,000. The manager believes that the new investment will result im direct labor savings of $67,000 per year for 10 years. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 0.870 1.626 2.283 1 2 3 4 0.943 1.833 2.673 3.465 0.909 0.893 1.736 1.690 2.402 3.037 2.487 3.170 1 2.855 0.833 1.528 2.106 2.589
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 15E
Related questions
Question
![Cash payback period, net present value analysis, and qualitative considerations
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly
equipment. The new equipment will cost $201,000. The manager believes that the new investment will result in
direct labor savings of $67,000 per year for 10 years.
Present Value of an Annuity of $1 at Compound Interest
Year
10%
12%
15%
20%
1
0.943 0.909 0.893 0.870
1.833
1.736.
1.690
1.626
2.673
2.487
3.465
3.170 3.037
3.791
3.605 3.353
4.917
4.355
4.111
3.785
5.582
4.868 4.564
4.160
6.210
5.335
4.968
4.487
6.802
5.759
5.328
4.772
7.360 6.145 5.650 5.019
a. What is the payback period on this project?
X years
2
3
4
5
6
7
8
9
6%
10
4.212
2.402
2.283
2.855
0.833
1.528
2.106
2.589
2.991
3.326
3.605
3.837
4.031
4.192
b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the
nearest whole dollar.
Net present value
c. What else should the manager consider in the analysis?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4a4c9b49-e5f1-46f7-9f2a-53f5de1b3170%2F00afd96c-5c12-44ab-832f-9590a93753cb%2Fddg05jl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Cash payback period, net present value analysis, and qualitative considerations
The plant manager of Orlando Electronics Company is considering the purchase of new automated assembly
equipment. The new equipment will cost $201,000. The manager believes that the new investment will result in
direct labor savings of $67,000 per year for 10 years.
Present Value of an Annuity of $1 at Compound Interest
Year
10%
12%
15%
20%
1
0.943 0.909 0.893 0.870
1.833
1.736.
1.690
1.626
2.673
2.487
3.465
3.170 3.037
3.791
3.605 3.353
4.917
4.355
4.111
3.785
5.582
4.868 4.564
4.160
6.210
5.335
4.968
4.487
6.802
5.759
5.328
4.772
7.360 6.145 5.650 5.019
a. What is the payback period on this project?
X years
2
3
4
5
6
7
8
9
6%
10
4.212
2.402
2.283
2.855
0.833
1.528
2.106
2.589
2.991
3.326
3.605
3.837
4.031
4.192
b. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the
nearest whole dollar.
Net present value
c. What else should the manager consider in the analysis?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![Survey of Accounting (Accounting I)](https://www.bartleby.com/isbn_cover_images/9781305961883/9781305961883_smallCoverImage.gif)
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
![Financial And Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![Survey of Accounting (Accounting I)](https://www.bartleby.com/isbn_cover_images/9781305961883/9781305961883_smallCoverImage.gif)
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
![Financial And Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
![EBK CFIN](https://www.bartleby.com/isbn_cover_images/9781337671743/9781337671743_smallCoverImage.jpg)
![Managerial Accounting: The Cornerstone of Busines…](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College