An industrial engineer proposed the purchase of RFID Fixed-Asset Tracking System for the company's warehouse and weave

Question:

An industrial engineer proposed the purchase of RFID Fixed-Asset Tracking System for the company's warehouse and weave rooms. The engineer felt that the purchase would provide a better system of locating cartons in the warehouse by recording the locations of the cartons and storing the data in the computer. The estimated investment, annual operating and maintenance costs, and expected annual savings are as follows.
• Cost of equipment and installation: $85,500
• Project life: 6 years
• Expected : $5,000
• Investment in working capital (fully recoverable at the end of the project life): $15,000
• Expected annual savings on labor and materials: $65,800
• Expected annual expenses: $9,150
• Depreciation method: five-year MACRS
The firm's marginal tax rate is 35%.
(a) Determine the net after-tax cash flows over the project life.
(b) Compute the IRR for this investment.
(c) At = 18%, is the project acceptable? Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...