An automobile-manufacturing company is considering purchasing an industrial robot to do spot welding, which is currently done
Question:
An automobile-manufacturing company is considering purchasing an industrial robot to do spot welding, which is currently done by skilled labor. The initial cost of the robot is $210,000, and the annual labor savings are projected to be $150,000. If purchased, the robot will be depreciated under MACRS as a five-year recovery property. The robot will be used for seven years, at the end of which time, the firm expects to sell it for $60,000. The company's marginal tax rate is 35% over the project period. Determine the net after-tax cash flows for each period over the project life. Assume MARR = 15%. MARR Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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