Answer:
1. Annual Net Cost Savings:
Reduction in cost due to replacement of six welders |
110000 |
Reduction in material waste |
7100 |
Maintenance Cost |
-43200 |
Annual Cost Savings |
73900 |
2a. Automated Welding Machine’s Net Present Value:
Timeline |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
Machine Cost |
-280000 |
||||||
Software and installation |
-80000 |
||||||
Scrap value of old welding machine |
15000 |
||||||
Annual Cost Savings |
73900 |
73900 |
73900 |
73900 |
73900 |
73900 |
|
Replace worn-out parts |
-43000 |
||||||
Scrap value of New welding machine |
26000 |
||||||
Net Cash Flow |
-345000 |
73900 |
73900 |
30900 |
73900 |
73900 |
99900 |
Discounted factor @ 15% |
1 |
0.87 |
0.756 |
0.658 |
0.572 |
0.497 |
0.432 |
Discounted Value |
-345000 |
64293 |
55868.4 |
20332.2 |
42270.8 |
36728.3 |
43156.8 |
Net Present Value |
-82350.5 |
2b. I would not recommend purchasing Automated welding machine because the NPV is negative.
3. Annual Intangible benefit:
Annual Intangible Brenefit |
21760.04 |
=PMT(15%,6,-82350.5,0,0) |
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