The company you are working for is trying to automate a process with the Fanuc (
ID: 2523872 • Letter: T
Question
The company you are working for is trying to automate a process with the Fanuc (Yellow) robot. This robot will cost $460,000 including installation. You expect it will have a 18 year life and will save annual production labor costs, which would have been $44,000 in the first year. Normally, with inflation, production labor would expect to increase by 4% per year, which you also do not have to pay because of the robot. Also, the equipment will take $6,000 per year in Maintenance costs that will hold flat. What is the Rate of Return on this project?
Please help provide a detailed explaination and answer to calculate the Rate of Return. I will rate highly. thanks
Rate of Return =________________________?Please help provide a detailed explaination and answer to calculate the Rate of Return. I will rate highly. thanks
Capita Labor Mainten Net cash YearEquipmen savings ance flow 0 1 2 4 9 10 12 13 14 15 16 17 18Explanation / Answer
net cash flow
(year1-18):labor savings - maintenance
Now apply formula
=IRR (select all above values of net cash flow)
Now press enter you will get answer as
8.70%
Year capital equipment labor savings maintenancenet cash flow
(year1-18):labor savings - maintenance
0 -460000 -460000 1 44000 6000 38000 2 44000*(1.04)=45760 6000 39760 3 44000*(1.04^2)=47590.40 6000 41590.40 4 44000*(1.04^3)=49494.02 6000 43494.02 5 44000*(1.04^4)=51473.78 6000 45473.78 6 44000*(1.04^5)=53532.73 6000 47532.73 7 44000*(1.04^6)=55674.04 6000 49674.04 8 44000*(1.04^7)=57901 6000 51901 9 44000*(1.04^8)=60217.04 6000 54217.04 10 44000*(1.04^9)=62625.72 6000 56625.72 11 44000*(1.04^10)=65130.75 6000 59130.75 12 44000*(1.04^11)=67735.98 6000 61735.98 13 44000*(1.04^12)=70445.42 6000 64445.42 14 44000*(1.04^13)=73263.23 6000 67263.23 15 44000*(1.04^14)=76193.76 6000 70193.76 16 44000*(1.04^15)=78241.51 6000 72241.51 17 44000*(1.04^16)=82411.17 6000 76411.17 18 44000*(1.04^17)=85707.62 6000 79707.62