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Homework answers / question archive / Fort Belvoir, VA is considering the purchase of a new $300k machine to assist with sorting recyclables at its post transfer station

Fort Belvoir, VA is considering the purchase of a new $300k machine to assist with sorting recyclables at its post transfer station

Accounting

  1. Fort Belvoir, VA is considering the purchase of a new $300k machine to assist with sorting recyclables at its post transfer station. The machine is anticipated to increase transfer station maintenance costs by $5,000 per year and generate savings of $15,000 per year (from reducing the required number of employees) for the entirety of its economic useful life of 10 years. The installation anticipates the machine will have a $150k salvage value at the end of year 10. If FBVA’s MARR for this period is 8%, is the robot a good investment? Why or why not?

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Machine Cost   $300000
working capital   $5000
savings   $15000
usefull life   10 year
salvage value  

$150000

A)Machine Cost   $300000
B)life of machine   10 year
C)working capital requirement   $5000
D)CPVIF for 10 years @ 8%   6.71
E)present value of working capital (C*D)   $33550
F)Present value of total cash out flow (A+E)   $333550
G)Yearly cash in flow   $15000
H)CPVIF for 10 years @ 8%   6.71
I)Present value of cash in flow   $100650
J) salvage vaue   $150000
K) PVIF For 10 years @ 8%   0.463
L)Present value of salvage value   $69450
M) Present value of total cash in flow   $170100
     
Net loss (F - M)   $163450

CPVIF = Cumulative present value intex factor

PVIF = Present value intex factor