Is this investment acceptable based on economic factor alone

Assignment Help Microeconomics

Reference no: EM131506830

Question: Extended Learning Exercise This case study is a justification of a computer system for, the ABC Company. The following are known data:

• The combined initial hardware and software cost is $80,000.

• Contingency costs have been set at $15,000. These are not necessarily incurred.

• A service contract on the hardware costs $500 per month.

• The effective income tax rate (t) is 38%.

• Company management has established a 15% (= im) per year hurdle rate (MARR). In addition, the following assumptions and projections have been made:

• In order to support the system on an ongoing basis, a programmer/analyst will be required. The starting salary (first year) is $28,000, and fringe benefits amount to 30% of the base salary. Salaries are expected to increase by 6% each year thereafter.

• The system is expected to yield a staff savings of three persons (to be reduced through normal attrition) at an average salary of $16,200 per year per person (base salary plus fringes) in year-zero (base year) dollars. It is anticipated that one person will retire during the second year, another in the third year, and a third in the fourth year.

• A 3% reduction in purchased material costs is expected; first year purchases are $1,000,000 in year-zero dollars and are expected to grow at a compounded rate of 10% per year.

• The project life is expected to be six years, and the computer capital investment will be fully depreciated over that time period [MACRS (GDS) five-year property class]. Based on this information, perform an actual-dollar ATCF analysis. Is this investment acceptable based on economic factors alone?

Reference no: EM131506830

Questions Cloud

Determining the medicare and medicaid : There are two major forces acting against each other when it comes to government healthcare programs such as Medicare and Medicaid.

Write about the first time you met a person : Write about the first time you met a person with learning differences. As you think back to this experience, what did the adults say to you

Communication in the planning process : Explore the functions of communication in the strategic and program planning processes for a health care organization.

Future direction of health care : Describe a minimum of five challenges from the list below that are defining the future strategic direction of health care.Proposed health care reform.

Is this investment acceptable based on economic factor alone : Extended Learning Exercise This case study is a justification of a computer system for, the ABC Company.

International management and leadership : Pepsi Co and Coke American beverage giants, must adhere to the U.S Foreign Corruption Act wherever their businesses may take them.

How would you describe a named pipe : How would you describe a Named pipe (FIFO) and what are the possible ways for creating a named FIFO or named pipe?

Find percentage of her annual salary sara will have to save : Refer to Example. Sara has decided that saving more than 12% of her annual salary was unrealistic. She is considering postponing her retirement until 2027.

Cpt code system and its different categories : What is the CPT code system and its different categories? Also, explain the differences between ICD and CPT coding system. 500 words.

User Account

All Pages