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15 Mar 2019
. A new inventory management system for ABC Company could be developed at a cost of
$260,000.The estimated netoperatingcosts and estimated netbeneï¬ts over sixyears ofoperation
would be:
Year Estimated Net
Operating Costs Estimated Net
Beneï¬ts
0 $260,000 $0
1 7,000 42,000
2 9,400 78,000
3 11,000 82,000
4 14,000 115,000
5 15,000 120,000
6 25,000 140,000
a. What would the payback period be for this investment? Would it be a good or bad
investment? Why?
b. What is the ROI for this investment?
c. Assuming a 15% discount rate, what is this investmentâs NPV?
. A new inventory management system for ABC Company could be developed at a cost of
$260,000.The estimated netoperatingcosts and estimated netbeneï¬ts over sixyears ofoperation
would be:
Year Estimated Net
Operating Costs Estimated Net
Beneï¬ts
0 $260,000 $0
1 7,000 42,000
2 9,400 78,000
3 11,000 82,000
4 14,000 115,000
5 15,000 120,000
6 25,000 140,000
a. What would the payback period be for this investment? Would it be a good or bad
investment? Why?
b. What is the ROI for this investment?
c. Assuming a 15% discount rate, what is this investmentâs NPV?
Elin HesselLv2
17 Mar 2019
