Internal rate of return - incremental analysis, Managerial Economics

The following contains cost and benefit information for two different alternatives for a w capital investment in computerized process technologies to control the process at a manufacturing plant (this is a tremendous upgrade from the current process).

ITEM

CMM-PLC Option

FMS-Integrated Option

Initial Investment

$ 15,000,000

$ 18,000,000

Annual O&M Costs

 

 

       Annual Labor Costs

500,000

520,000

       Annual Material Costs

498,000

450,000

       Annual Overhead Costs

1,500,000 

1,600,000

       Annual Tooling Costs

225,000

230,000

       Annual Income Taxes

950,000

975,000

Net Annual Benefits (revenue increase & maintenance savings)

$ 6,500,000 

$ 7,000,000

Net Salvage Value

$ 500,000

$ 750,000

 

 

 

Use internal rate of return (IRR) and the appropriate incremental analysis to determine the best alternative.  Use 8% as the minimum attractive rate of return (MARR) and assume an 8 YEAR useful life for both projects.

Posted Date: 2/16/2013 12:32:31 AM | Location : United States







Related Discussions:- Internal rate of return - incremental analysis, Assignment Help, Ask Question on Internal rate of return - incremental analysis, Get Answer, Expert's Help, Internal rate of return - incremental analysis Discussions

Write discussion on Internal rate of return - incremental analysis
Your posts are moderated
Related Questions
The city of Cabernet is very popular for its production of wine. The inhabitants of the city have an aggregate demand for wine that can be described as follows: where Q d

REASONS FOR FLUCTUATIONS IN AGRICULTURAL PRICES Production depends on factors beyond the control of the producers e.g. weather, disease and pests.  Actual and planned output i

A company is selling a  particular brand of tea and wishes to introduce a new flavor. How will the company forecast demand for it.

Calculate point elasticity of demand for demand function Q=10-2p for decrease in price from Rs 3 to Rs 2

Topic:  Company Case Study and Industry Analysis   Instruction:  1) choose a company;                     2) recognize the market industry type;                     3)

APPLICATION OF MANAGERIAL ECONOMICS Tools of managerial economics can be used to accomplish virtually all the goals of a business organisation in an efficient manner. Typical m

Theories associated with different market structures A firms profit maximising output decisions take into account the market structure under that they operate. There are 4 type

The concept of isocost In the use of resources, firms are faced with opportunity cost.  For every addition of say capital, they must forego a unit of say labour. Expositio

Electron Control, Inc., sells voltage regulators to other manufacturers, who then customize and distribute the products to quality assurance labs for their sensitive test equipment

Illustrate the application of economic theory to some business problems