Question: 34) Short Answer Question H2 (Show all work): A firm decides that it may save some costs by purchasing a robot-arm, which will replace several
34) Short Answer Question H2 (Show all work): A firm decides that it may save some costs by purchasing a robot-arm, which will replace several workers. The robot-arm will cost $100,000. As a result of this purchase, management predicts that unit sales will increase on average by 120,000 per year for the next 5 years. The unit sales price is $2.75, the variable costs are $2 /unit, and fixed costs for maintenance are $5,000/ year. Also, changes in NWC is $10,000, but will be reclaimed at the end of the project. Tax rate is 25%. Required return is 20%. Depreciation is straight-line, no salvage. What are the OCEs? Assurning a required return of 20%, should you accept or reject this project, calculating both NPY and IRR
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