Whirlpool Europe is a division of Whirlpool Corporation, one of the world's largest manufacturers of home appliances. The company is considering an investment in an enterprise resource planning (ERP) system that would integrate all of its business functions, including supply chain management, production planning, and customer relationship management. The system is expected to cost 15 million and have a useful life of 5 years.

To estimate the relevant cash flows for this investment, we need to consider the following factors:

Initial investment: The cost of the ERP system is 15 million, which is the initial investment.

Annual cost savings: The ERP system is expected to generate annual cost savings of 5 million through improved efficiency and streamlined business processes.

Annual maintenance cost: The annual maintenance cost for the ERP system is estimated to be 1 million per year.

Salvage value: The salvage value of the ERP system after 5 years is estimated to be 2 million.

Questions:

2. What method should be used to determine if the investment should be undertaken?
4. What are the relevant cash flows?
6. Should the firm make the investment?

Answer rating: 100% (QA)

To determine whether the investment in the ERP system should be undertaken we can use the Net Presen... View the full answer