Digital Corporation is considering updating its automated inventory control system. A supplier has estimated the first cost as $2,400,000 and the annual savings as $800 000; 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. The automated system is in Class 10, with a 30% CCA.

 a. What is the present worth of the new system? 

b. Should the company make this investment? Explain.

Answer rating: 100% (QA)

a To find the present worth of the new system we need to calculate the annual cash flows and then di... View the full answer