Response to the following problem:
The plant manager of Jurassic Industries is considering the purchase of new automated assembly equipment. The new equipment will cost $3,437,500. The manager believes that the new investment will result in direct labor savings of $625,000 per year for 10 years.
a. What is the payback period on this project?
b. What is the net present value, assuming a 10% rate of return? Use the present value tables .
c. What else should the manager consider in the analysis?