Question: Automatic round the clock tellers are the newest thing in the banking industry. Several companies have developed these computerized money machines and are bombarding bank

Automatic round the clock tellers are the newest thing in the banking industry. Several companies have developed these computerized money machines and are bombarding bank managers with sales people and advertising brochures. Philippine Industrial Bank plans to install such device and decided on the S

-

JC machine. Ms

.

Chen, the controller

- -

has prepared the decision analysis shown below. She has recommended the purchase of the machine based on the positive present value shown in the analysis.

(

please see photo

)

The bank uses straight

-

line depreciation. The before

-

tax minimum desired rate of return is

16

percent, and a

10

percent rate is used for interpreting after

-

tax data. Assume a

30

percent tax rate for normal operations and capital gains items.

1 .

Analyze the work of Ms

.

Chen. What changes need to be made in her capital expenditure analysis?

2 .

What would you recommend to bank management about the S

-

JC machine purchase?

Automatic round the clock tellers are the newest

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