The Children’s Place, a children’s clothing manufacturer, has always found payro
ID: 2593744 • Letter: T
Question
The Children’s Place, a children’s clothing manufacturer, has always found payroll processing to be costly because it must be done by a clerk so that the number of piece-goods coupons received by each employee can be collected and the types of tasks performed by each employee can be calculated. Not long ago, an industrial engineer designed a system that partially
automates the process by means of a scanner that reads the piece-goods coupons. Management is enthusiastic about this system because it utilizes some personal computer systems that were purchased recently. It is expected that this new automated system will save $45,000 per year in labor. The new system will cost about $30,000 to build and test prior to operation. It is expected that operating costs, including income taxes, will be about $5,000 per year. The system will have a five-year useful life. The expected net salvage value of the system is estimated to be $3,000. (a) Identify the cash inflows over the life of the project. (b) Identify the cash outflows over the life of the project. (c) Determine the net cash flows over the life of the project.
Qucstion The Childr's Place, s children's clotning ma Lfacturer, has always found Payrn Prccesaing to be rstly temse it must be done by derk sc hat the number cf p :ce gnons cou ons reccived by cach (2 marks scarner that reads the pace cocs couoons. N ar.:gamert s anthusiastic about ths sys-em becausa it utilizas son'e 6rsenal conputar systems that ware Furch:sad recently, t is expected that this new automated systen ille$45,000 erye n lator. The resystern will cost o0.000 to build and test prior tJ perati01. It is expected tlr: operating costs. 1clucing income ta»es, wi b.oout (a) Ident fr the cas inows over the life of the pro ect (b Ide ntif ha ash autflavs owur tha life afthe pro art ( Determine tha net cash f aws aver the life af the Proact. (5 marks) Project's Cash Flaw [S) ,500 2,013 3.500 1.000 200 S00 2,500 (a) Calclate the pagaack aeriad for aach przect. (b) Letermine whether is meaningful to calculate a payoack penoc fo-Jroiect C. (e) Calculate he IRR of aac poec: Note:assume that the discournt rate is 1056)Explanation / Answer
The Children Place Savings Project salvage value Cash Inflows Operating Cost Project cost Cash Outflows Net cash Inflows Year 30000 30000 -30000 0 45000 45000 5000 5000 40000 1 45000 45000 5000 5000 40000 2 45000 45000 5000 5000 40000 3 45000 45000 5000 5000 40000 4 45000 45000 5000 5000 40000 5 45000 3000 48000 5000 5000 43000