Philipp Is Considering Automating Its Production Line

question 24

Multiple Choice

Philipp is considering automating its production line. It will cost $40,000 to acquire the necessary equipment. The annual cost savings are expected to be $8,000 per year for 14 years. The firm requires a 20% return. Ignoring income taxes, what is the payback period?

• A) 6 years
• B) 3 years
• C) 4.2 years
• D) 5 years

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Definitions:

Profitable Customer Relationships

The ongoing connections a business cultivates with individuals or other businesses that result in a mutually beneficial exchange, ideally leading to repeat business and increased profitability.

Value Map

A visual tool used to compare the value propositions of different products or services in the market, analyzing factors such as price, quality, and performance.

Specific Customer Needs

Particular requirements or desires of consumers that businesses aim to meet with their products or services.

Competitive Advantage

The attributes that allow an organization to outperform its competitors, such as cost structure, product offerings, brand, and service.