Large food-processing corporation is considering using laser technology to speed up and eliminate waste in the potato-peeling process. to implement the system, the company anticipates needing $3.5 million to purchase the industrial-strength lasers. the system will save $1,550,000 per year in labor and materials. however, it will require an operating and maintenance cost of $350,000. annual income taxes will be $150,000. the system is expected to have a 10-year service life and will have a salvage value of about $200,000. if the company's marr is 18%, use the npw method to justify the project.

The NPV using MARR of 18% is 1,257,004. Since the NPV is positive, accepting the project is justified.

Explanation:

NPV=TVECF−TVIC

Where

TVECF is the present  value of the expected cash flow; and TVIC is the present value of invested amount

Saving                          1,550,000

Les Costs:    

maintenance350,000  

income tax150,000         500,000

0-9                                 1,050,000

10   1,050,000 +200,000=  1,250,000

Year      inflow[email protected] 18%          sum

0-3,500,000    1               -3,500,000

11,050,0000.847458889,830.5

21,050,0000.718184         754,093.7

31,050,0000.608631639,062.4

41,050,0000.515789541,578.3

51,050,0000.437109458,964.7

61,050,0000.370432388,953.1

71,050,0000.313925329,621.3

81,050,0000.266038279,340.1

91,050,0000.225456236,728.9

101,250,0000.191064        238,830.6

 NPV                         1,257,004

mauve company permits employees to occasionally use the copying machine for personal purposes