You have been asked to carry out the economic feasibility analysis for the acquisition of a high-speed automatic palletizer that has an investment cost of $8,000,000 USD.
The existing palletizer is quite old and has no resale value.

The market value of the new palletizer is estimated to be $500,000 USD after eight years.

The palletizer will handle two million pallets (pallets) each year during the seven years of the project's useful life.

What net savings per pallet (i,e. total savings minus expenses) will the palletizer need to generate to justify this purchase given a IRR of 15% per year?

Answer rating: 100% (QA)

To calculate the net savings per pallet required to justify the purchase of the new palletizer we first need to calculate the total savings per year a... View the full answer