A high-tech material handling system was offered by a supplier to a large automobile manufacturer. The installation cost of the system is worth Php 1,000,300,000. This system will save Php 214,000,000 per year in manual labor, and it will incur Php 93,000,000 in annual operating and maintenance expenditures. The salvage value at the end of the system’s 10-year life is negligible. If the company’s hurdle rate (MARR) is 10% per year, should the system be recommended for implementation? determine the following: a. Evaluate the system using linear interpolation of the Internal Rate of Return method. b. Evaluate the system using spreadsheet solution of the Internal Rate of Return method.

A high-tech material handling system was offered by a supplier to a large automobile manufacturer. The installation cost of the system is worth Php 1,000,300,000. This system will save Php 214,000,000 per year in manual labor, and it will incur Php 93,000,000 in annual operating and maintenance expenditures. The salvage value at the end of the system’s 10-year life is negligible. If the company’s hurdle rate (MARR) is 10% per year, should the system be recommended for implementation? determine the following: a. Evaluate the system using linear interpolation of the Internal Rate of Return method. b. Evaluate the system using spreadsheet solution of the Internal Rate of Return method.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 3E

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