(Memorandum Required)
Simon Enterprises Is Considering the Purchase of a Flexible

Essay

(Memorandum required)
Simon Enterprises is considering the purchase of a flexible manufacturing system. The savings associated with the system are estimated to be as follows: $\begin{array}{lr}\text { Increased quality } & £ 75,000 \\\text { Decrease in operating costs } & 20,000 \\\text { Increase in on-time deliveries } & 5,000\end{array}$ The system will cost £400,000 and will last ten years. The system would have a salvage value of £30,000 at the end of ten years. The company's cost of capital is 8 per cent.