A Flexible Manufacturing System Is Expected to Cost $25,000,000 but Has

question 5

Multiple Choice

A flexible manufacturing system is expected to cost $25,000,000 but has present values of after-tax cash flow as shown in the table.The interest rate used is 10 percent.What is the payback of this investment?
$$\begin{array} { | c | c | c | } \hline \text { Year } & \begin{array} { c } \text { Present } \\\text { Value }\end{array} & \begin{array} { c } \text { Net Present } \\\text { Value }\end{array} \\\hline 1 & \$ 11,000,000 & \$ 10,000,100 \\\hline 2 & \$ 9,000,000 & \$ 7,437,600 \\\hline 3 & \$ 7,000,000 & \$ 5,259,800 \\\hline 4 & \$ 5,000,000 & \$ 3,415,000 \\\hline 5 & \$ 3,000,000 & \$ 1,862,700 \\\hline\end{array}$$

• A) Less than two years
• B) Between two and three years
• C) Between three and four years
• D) More than four years

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Definitions:

Geographical Adjustments

Modifications or changes made to strategies or operations based on geographic locations or conditions.

FOB Origin Pricing

A pricing term indicating that the buyer takes responsibility for the goods and shipping costs from the seller's location, bearing all risks.

Spider Web Pricing

A pricing strategy that involves setting a low price for one product to attract customers and then raising prices once the customer engagement has been established.

Price Discrimination

A pricing strategy where a company charges different prices for the same product or service to different consumers, often based on factors like location, age, or purchasing history.