Andes, Inc. is considering the replacement of its manual material handling equipment withautonomous vehicles at a net initial cost of $12 million. The expected annual savings in operating costs are asshown below. MARR is 10% per year compounded annually.End of Year123 4 563 4.5 4.5Annual savings (millions) | 2.25 | 2.25 | 3Compute the simple payback period for this replacement option.Determine the discounted payback period (DPBP). It is enough if you determine in which yearthe DPBP falls.

Information Provided: MARR = 10% Initial cost = $12 million Year 1 Savings = $2.25 million Year 2…

Answered: Compute the simple payback period for…

Compute the simple payback period for this replacement option. Determine the discounted payback period (DPBP). It is enough if you determine in which year falls

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 1PA: Your company is planning to purchase a new log splitter for is lawn and garden business. The new...

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Question

Andes, Inc. is considering the replacement of its manual material handling equipment with
autonomous vehicles at a net initial cost of $12 million. The expected annual savings in operating costs are as
shown below. MARR is 10% per year compounded annually.
End of Year
1
2
3 4 5
6
3 4.5 4.5
Annual savings (millions) | 2.25 | 2.25 | 3
Compute the simple payback period for this replacement option.
Determine the discounted payback period (DPBP). It is enough if you determine in which year
the DPBP falls.

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