E Mart is considering purchasing a new inventory control system featuring state-of-the-art technology. Two vendors have...

 

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E Mart is considering purchasing a new inventory control system featuring state-of-the-art technology. Two vendors have submitted proposals to supply E Mart with the new system. The system offered by Vendor C requires an initial outlay of $325,000 and has a useful life of 7 years. The expected cash inflows from the system are $65,000 for each of the 7 years. Vendor D has proposed to sell E Mart a system that will require an initial outlay of $140,000 and has an 7-year life. Vendor D's system is expected to provide cash inflows to E Mart of $42,000 per year for the 7 years. a. Calculate the payback periods for Vendor D? Show answer to 2-decimal points [XX.XX] e. Calculate the net present value (NPV) of each system if E Mart's required rate of return is 11.5%. What is the NPV for Vendor D? Show answer to 2-decimal points [XX.XX]. f. Should E Mart accept one or the other, neither or both systems? If one or the other, which one? Explain your reasoning. E Mart is considering purchasing a new inventory control system featuring state-of-the-art technology. Two vendors have submitted proposals to supply E Mart with the new system. The system offered by Vendor C requires an initial outlay of $325,000 and has a useful life of 7 years. The expected cash inflows from the system are $65,000 for each of the 7 years. Vendor D has proposed to sell E Mart a system that will require an initial outlay of $140,000 and has an 7-year life. Vendor D's system is expected to provide cash inflows to E Mart of $42,000 per year for the 7 years. a. Calculate the payback periods for Vendor D? Show answer to 2-decimal points [XX.XX] e. Calculate the net present value (NPV) of each system if E Mart's required rate of return is 11.5%. What is the NPV for Vendor D? Show answer to 2-decimal points [XX.XX]. f. Should E Mart accept one or the other, neither or both systems? If one or the other, which one? Explain your reasoning.

Answer rating: 100% (QA)

a To calculate the payback period for Vendor D we need to determine how long it takes for the initial investment to be recovered Payback period for Ve... View the full answer