An automobile-manufacturing company is considering purchasing an industrial robot to do spot welding, which is currently done by skilled labor. The initial cost of the robot is $180,000, and the annual labor savings are projected to be $103,753. If purchased, the robot will be depreciated under MACRS as a five-year recovery property. The robot will be used for seven years, at the end of which time, the firm expects to sell it for $58,000. The company's marginal tax rate is 25% over the project period. Assume MARR = 18%. Click the icon to view the MACRS depreciation schedules.

An automobile-manufacturing company is considering purchasing an industrial robot to do spot welding, which is currently done by skilled labor. The initial cost of the robot is $180,000, and the annual labor savings are projected to be $103,753. If purchased, the robot will be depreciated under MACRS as a five-year recovery property. The robot will be used for seven years, at the end of which time, the firm expects to sell it for $58,000. The company's marginal tax rate is 25% over the project period. Assume MARR = 18%. Click the icon to view the MACRS depreciation schedules.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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