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
2 answers