The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $96,000. The manager believes that the new investment will result in direct labor savings of $32,000 per year for 10 years.Present Value of an Annuity of $1 at Compound InterestYear6%10%12%15%20%10.9430.9090.8930.8700.83321.8331.7361.6901.6261.52832.6732.4872.4022.2832.10643.4653.1703.0372.8552.58954.2123.7913.6053.3532.99164.9174.3554.1113.7853.32675.5824.8684.5644.1603.60586.2105.3354.9684.4873.83796.8025.7595.3284.7724.031107.3606.1455.6505.0194.192a. What is the payback period on this project?fill in the blank 1 yearsb. What is the net present value, assuming a 10% rate of return? Use the table provided above. Round to the nearest whole dollar.Net present value$fill in the blank 2c. What else should the manager consider in the analysis? Check My Work

The question is related to Capital Budgeting. The pay back period is the length of time required to…

Answered: The plant manager of Shenzhen…

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

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The plant manager of Shenzhen Electronics Company is considering the purchase of new automated assembly equipment. The new equipment will cost $96,000. The manager believes that the new investment will result in direct labor savings of $32,000 per year for 10 years.

Present Value of an Annuity of $1 at Compound Interest
Year	6%	10%	12%	15%	20%
1	0.943	0.909	0.893	0.870	0.833
2	1.833	1.736	1.690	1.626	1.528
3	2.673	2.487	2.402	2.283	2.106
4	3.465	3.170	3.037	2.855	2.589
5	4.212	3.791	3.605	3.353	2.991
6	4.917	4.355	4.111	3.785	3.326
7	5.582	4.868	4.564	4.160	3.605
8	6.210	5.335	4.968	4.487	3.837
9	6.802	5.759	5.328	4.772	4.031
10	7.360	6.145	5.650	5.019	4.192

a. What is the payback period on this project?
fill in the blank 1 years

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

$fill in the blank 2

c. What else should the manager consider in the analysis?

Check My Work

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