A company wants to buy a labor-saving piece of equipment. Using the NPV method of capital budgeting, determine the proposal's appropriateness and economic viability with the following information:
Labor content is 12% of sales, which are annually $10 million.
The new equipment will save 20% of labor annually.
The new equipment will last 5 years.
The new equipment will cost $200,000.
The discount rate is 10%
2 answers
I have this same problem. I just cannot figure out if the labor content is needed to calculate the NPV. Any ideas?
NPV method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:
• The new program will increase current sales, $10 million, by 20%.
• The new program will have a profit margin is 5% of sales.
• The new program will have a 3-year effect.
• The new program will cost the company $200,000 in the first year.
• The new program will increase current sales, $10 million, by 20%.
• The new program will have a profit margin is 5% of sales.
• The new program will have a 3-year effect.
• The new program will cost the company $200,000 in the first year.
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