SOLVE USING EXCEL:

A company bought an AGV for its distribution center for $800,000 and its installation cost were $200,000. The AGV has a 5-year MACRS-GDS property class. During the 5th year the company disposes the asset with a salvage value of $450,000. The expected savings are $400,000 during the first year increasing by 5% every year thereafter. The O& M are expected to be $50,000 the first year increasing by a gradient series of $5,000 thereafter. The company financed the total cost of the AGV with a loan at 5%, which needs to be paid in three years with the following terms: only interests are paid years 1, 2 and 3, and the principal is paid at the end of year 3. The company tax rate is 25% and MARR is 10%.