International Computing Corporation (ICC) is considering updating its inventory control system. The supplier has estimated the first cost as $2 300 000 and the annual savings as $880 000; after its 10-year life, it will have a salvage value of $200 000. The tax rate for ICC is 45 percent and the company uses an after-tax MARR of 10 percent. What is the present worth of the new system? (Hint: Find the CSF to determine the CTF to be applied to the first cost in the PW calculation). Should ICC make this investment?

International Computing Corporation (ICC) is considering updating its inventory control system. The supplier has estimated the first cost as $2 300 000 and the annual savings as $880 000; after its 10-year life, it will have a salvage value of $200 000. The tax rate for ICC is 45 percent and the company uses an after-tax MARR of 10 percent. What is the present worth of the new system? (Hint: Find the CSF to determine the CTF to be applied to the first cost in the PW calculation). Should ICC make this investment?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 2E

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