Question

A large food-processing corporation is considering using laser technology to speed up and eliminate waste in the potato- peeling process. To implement the system, the company anticipates needing RM5 million to purchase the industrial strength lasers. The system will save RM1350000 per year in labor and materials. However, it will require an additional operating and maintenance cost of RM360,000. Annual income taxes will also increase by RM160,000. The system is expected to have a 11-year service life and will have a salvage value of about RM200,000. If the company's MARR is 16%, use the NPW method to justify the project. PW of the system. Is the system justified to be implemented? Format -546245 Format: xx

Answer 1

PW (present worth ) is present values of future inflows and outflows.Net annual saving or additional cost is calculated and multiplied by present annuity value factor.Salvage value is multiplied by present value factor at the end of life of project.