A spare parts agency wishes to evaluate the feasibility of acquiring a new inventory system, which...

A spare parts agency wishes to evaluate the feasibility of acquiring a new inventory system, which has a value of ¢ 8,500,000 and a useful life of 5 years, at the end of which its residual value is 10% of the cost.
The current system has a book value of ¢ 3,000,000 and has 5 years of useful life; however, there is an offer to sell them at ¢ 3,500,000.
The company depreciates its fixed assets by the straight-line method and is in the range of 30% of income tax, with a capital cost of 25%

With this new system there will be a saving in operating expenses of ¢ 900,000 per year and also a decrease in inventories of ¢ 250,000.
to. Determine the initial investment of the project.
b. Determine the net cash flows of the project in its time horizon.
c. Quantify and interpret the profitability of the project. Use all methods
analyzed.

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