An industrial engineer proposed the purchase of scanning equipment for the company's warehouse and weave rooms. the engineer felt that the purchase would provide a better system of locating cartons in the warehouse by recording the locations of the cartons and storing the data in the computer. the estimated investment, annual operating and maintenance costs, and expected annual savings are as follows: Cost of equipment and installation: $65, 500. Project life: 6 years.
Expected salvage value: $3,000. Investment in working capital (fully recoverable at the end of the project life): 10,000.
Expected annual savings on labor and materials: $55, 800. Expected annual expenses: $8, 120. CCA rate: 30%. the firm's marginal tax rate is 35%.
Determine the net after-tax cash flows over the project life. Compute the IRR for this investment. At MARR = 18%, is the project acceptable?