Today Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are as follows: $$\begin{array} { l c }
\text { Decreased waste } & \$ 150,000 \
\text { Increased quality } & 200,000 \
\text { Decrease in operating costs } & 125,000 \
\text { Increase in on-time deliveries } & 25,000
\end{array}$$ The system will cost $1,500,000 and will last 10 years. The company's cost of capital is 10%.
Required:
A. Calculate the payback period for the flexible manufacturing system.
B. Calculate the NPV for the flexible manufacturing system.

Question

Today Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are as follows: $$\begin{array} { l c } 
\text { Decreased waste } & \$ 150,000 \
\text { Increased quality } & 200,000 \
\text { Decrease in operating costs } & 125,000 \
\text { Increase in on-time deliveries } & 25,000
\end{array}$$ The system will cost $1,500,000 and will last 10 years. The company's cost of capital is 10%.
Required:
A. Calculate the payback period for the flexible manufacturing system.
B. Calculate the NPV for the flexible manufacturing system.

Quizplus · Accepted Answer

The Answer of Today Production Company is considering the purchase of a flexible manufacturing system. The annual cash benefits/savings associated with the system are as follows: $$\begin{array} { l c } 
\text { Decreased waste } & \$ 150,000 \
\text { Increased quality } & 200,000 \
\text { Decrease in operating costs } & 125,000 \
\text { Increase in on-time deliveries } & 25,000
\end{array}$$ The system will cost $1,500,000 and will last 10 years. The company's cost of capital is 10%.
Required:
A. Calculate the payback period for the flexible manufacturing system.
B. Calculate the NPV for the flexible manufacturing system.

Today Production Company Is Considering the Purchase of a Flexible