Reference no: EM132484895

The estimated purchase price for the equipment required to move the operation in-house would be $500,000. Additional net working capital to support production would be needed in the amount of $25,000 per year starting in year 0 and through all 5 years of the project to support production.The current spending on this component is $875,000. The estimated cash flow savings of bringing the process in-house is 20% or annual savings of $175,000. This includes the additional labor and overhead costs required.Your company has access to a credit line and could borrow the funds at a rate of 6%.Finally, the equipment required is anticipated to have a somewhat short useful life, as a new wave of technology is on the horizon. Therefore, it is anticipated that the equipment will be sold after five years for $25,000.

Using the data presented above for this profit and supply chain improvement project, calculate each of the following: Nominal Payback, Discounted Payback, Net Present Value, Internal Rate of Return