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March 27, 2017

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A company wants to buy a labor-saving piece of equipment. Using the NPV method of capital budgeting, determine the proposal's appropriateness and economic viability with the following information:

Labor content is 12% of sales, which are annually $10 million.

The new equipment will save 20% of labor annually.

The new equipment will last 5 years.

The new equipment will cost $200,000.

The discount rate is 10%

  • Finance - ,

    I have this same problem. I just cannot figure out if the labor content is needed to calculate the NPV. Any ideas?

  • Finance - ,

    NPV method of capital budgeting, determine the proposal’s appropriateness and economic viability with the following information:

    • The new program will increase current sales, $10 million, by 20%.
    • The new program will have a profit margin is 5% of sales.
    • The new program will have a 3-year effect.
    • The new program will cost the company $200,000 in the first year.

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