Posted by **Mary** on Tuesday, August 31, 2010 at 10:04pm.

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 -
**Jane**, Friday, September 3, 2010 at 1:56pm
I have this same problem. I just cannot figure out if the labor content is needed to calculate the NPV. Any ideas?

- Finance -
**suri**, Saturday, September 6, 2014 at 2:36am
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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