A new inventory management system for ABC Company could be developed at a cost of $200,000. The estimated net operating costs and estimated net benefits over six years of operation would be:

Question

Year Estimated Net Operation
Estimated NetBenefits

0 200,000 0
1 7,0000 $ $52,000
2 9,400 $68,000
3 11,0000 $82,000
4 14,000 $115,000
5 15,000 $120,000
6 16,000 $ $120,000

a. What would the payback period be for this investment? Would it be a good or bad investment? Why?
b. What is the ROI for this investment?
c. Assuming a 12% discount rate, what is this investment NPV?

Answer 1

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Answer 2

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Answer 3

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