Reference no: EM132973973

J Mart is considering purchasing a new inventory control system featuring state-of-the-art technology. Two vendors have submitted proposals to supply J Mart with the new system. The system offered by Vendor A requires an initial outlay of $325,000 and has a useful life of 8 years. The expected cash inflows from the system are $70,000 for each of the 8 years. Vendor B has proposed to sell J Mart a system that will require an initial outlay of $190,000 and has an 8-year life. Vendor B's system is expected to provide cash inflows to J Mart of $40,000 per year for the 8 years.

Problem a. Calculate the payback periods for Vendor A? Show answer to 2-decimal points

Problem b. Calculate the payback periods for Vendor B? Show answer to 2-decimal points

Problem c. Based on your answer to the previous questions regarding payback, which should you accept, if any, if your required payback period were 4 years? Why?

Problem d. Calculate the net present value (NPV) of each system if J Mart's required rate of return is 12%. What is the NPV for Vendor A? Show answer to 2-decimal points

Problem e. Calculate the net present value (NPV) of each system if J Mart's required rate of return is 12%. What is the NPV for Vendor B? Show answer to 2-decimal points

Problem f. Should J Mart accept one or the other, neither or both systems? If one or the other, which one? Explain your reasoning.