please help with payback period. see attached.

please help with payback period. see attached.

ATTACHMENT PREVIEW

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24. 31
Assume that United Technologies is evaluating a proposal to change the company’s manual
design system to a computer aided design (CAD) system.
The proposed system is expected to
save 10,000 design hours per year; an operating cost savings of $40 per hour.
The annual cash
expenditures of operating the CAD system are estimated to be $200,000.
The CAD system
requires an initial investment of $500,000.
The estimated life of this system is 5 years with no
salvage value.
The tax rate is 40%, and the United Technologies uses straight-line depreciation
for tax purposes.
United Technologies has a cost of capital of 16%.
REQUIRED
a.
Compute the annual after tax cash flows related to the CAD Project.
b.
Compute each of the following for the project:
a.
Payback period
b.
Net present value

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