3 ning Activity: Is your great idea worth it? 4 Activity: You and your team came up with a plan to automate the very time-consuming process of manual welding by using robotic welders. First, compute how this would increase productivity. 5 6 7 Year 1 Year 2 Annual Inflation 8 Output (sales, in Smillion) $ 120 $ 160 2.50% 9 Labor (payroll, in $million) $ 32 $ 26 3.20% 10 Capital (expenses, in $million) $ 45 $ 65 2.50% 11 One-time capital investment (Smillion) $ $ 10 2.50% 12 13 14 Productivity Year 1 - 15 16 Productivity Year 2- (note: adjusted for inflation in NPV) 17 18 Change in Productivity = 19 Next, using just the first year benefits (no amortization/depreciation), what is the ROI for this investment? 20 21 22 ROI = 23 24 25 Based on these results, is this project a good idea or not? 26 27 28 29 30 31