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

Macro-economic policy objectives The major macro-economic policy objectives which the governments strive to achieve are: i. Full employment One of the main objectives

The Mixed Economy There are no economies in the world which are entirely 'market' or planned, all will contain elements of both systems. The degree of mix in any one econom

Q. What do you mean by Theory of Firm? Microeconomics especially the theory of firm, assumed importance and attracted considerable attention in the early 20 th century. This sh

Lender of Last Resort The central bank also acts as the lender of last resort. Historically, this function developed out of the special position of the central banks. The centr

Bank Deposit Bank notes and coins together constitute the currency in circulation.  But they form only a part of the total money supply.  The larger part of the money supply i

Time domain: Time domain is a term which is used to define the analysis of mathematical functions or physical signals, with respect to time. In the time domain, signal or function

Why does the demand curve slope downwards? As Figure above demonstrates, demand curve slopes downward to the right. Downward slope of the demand curve reads the law of demand i

A firm is employing 100 hours of labor and 50 tons of cement to produce 500 blocks. Labor costs Rs 4 per hour and cement costs Rs 12 per ton. For the quantities employed MPL = 3 an

The demand for good X is estimated to be:  where p x price of X in dollars M = personal disposable income in trillions of dollars per year P y = price of a competitive in do