Assume that Monsanto Corporation is considering the replacement of some of its older and outdated carpet manufacturing system. Its objective is to improve the efficiency of operations in terms of both speed and reduction in the number of defects. The company’s finance department has compiled pertinent data that will allow it to conduct a marginal cost–benefit analysis for the proposed system replacement. The cash outlay for new system would be approximately $4,800,000. The Old system was purchased 5 years age at a price of $10,000,000, with an accumulated Depreciation of $7,000,000. The potential net selling price add up to $2,000,000. The total benefits from the new system (measured in today’s dollars) would be $3,600,000. The benefits of the old system over a similar period of time (measured in today’s dollars) would be $1,200,000. TO DO Create a spreadsheet to conduct a marginal cost–benefit analysis for Monsanto Corporation, and determine the following:

a. The marginal (added) benefits of the proposed new system.

b. The marginal (added) cost of the proposed new system.

c. The net benefit of the proposed new system.

d. What would you recommend that the firm do? Why?

Answer rating: 100% (QA)

a The marginal added benefits of the proposed new system would be the total benefi... View the full answer