Question: Walmart is planning to implement a new inventory management system with the following costs and benefits: Initial Investment: $500 million Annual Savings in Inventory Costs:

  • Walmart is planning to implement a new inventory management system with the following costs and benefits:
    • Initial Investment: $500 million
    • Annual Savings in Inventory Costs: $150 million
    • Maintenance Costs: $20 million annually
    • Depreciation Expense: $50 million annually
    • Tax Rate: 25%
  • Requirements:
    1. Calculate the annual net savings from the new inventory system.
    2. Prepare a cost-benefit analysis over a five-year period.
    3. Analyze the payback period for the initial investment.
    4. Discuss the strategic importance of the new inventory system for Walmart’s operations.
    5. Evaluate the risks and potential disruptions during the implementation phase.

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