As an Engineering Manager in one of the Food and beverage companies, you proposed the purchase of a radio frequency identifying based tracking system that would provide a better system of stock locating in the warehouse by recording the locations of the stock and storing the data in the computer.
To purchase this Tracking System for the company’s warehouse, you are considering the estimated investment, annual operating and maintenance costs and expected annual savings are as follows
Cost of equipment and installation: $85,500
Project life: 6 years
Expected salvage value: $5,000
Investment in working capital (fully recoverable at the end of the project life): $15,000
Expected annual savings on labor and materials: $65,800
Expected annual expenses: $9,150
Based on the data given:
a) Compute the PV, FV, IRR, and PP for this investment.
b) At MARR = 15%, is the project acceptable?