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Project Valuation Glentech Manufacturing is cons...




Project Valuation Glentech Manufacturing is considering the purchase of an automated parts handler for the assembly and test area of its Phoenix, Arizona, plant. The handler will cost $250,000 to purchase plus $10,000 for installation and employee training. If the company undertakes the investment, it will automate a part of the semiconductor test area and reduce the operating costs by $70,000 per year for the next 10 years. However, five years into the investment?s life, Glentech will have to spend an additional $100,000 to update and refurbish the handler. The investment in the handler will be depreciated using straight-line depreciation over 10 years, and the refurbishing costs will be depreciated over the remaining five-year life of the handler (also using straight-line depreciation). In 10years, the handler is expected to be worth$5,000, although its book value will be zero. Glentech?s tax rate is 30%, and its opportunity cost of capital is 12%.


Paper#2612 | Written in 18-Jul-2015

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