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A manufacturing company is seeking to automate more of its process. By using a robotic welder it can reduce labor costs. The initial cost of the new system is $250,000, and the annual labor savings are projected to be $58,000. The company expects the robot will be used for 7 years, depreciated under MACRS (5 yr recovery) and sold after 7 years for $30, 000. The effective tax rate is 39%. The company’s after tax MARR is 12%. a. What is the NPV of the ATCF? b. Is this a good investment? c. If not, what possibly could be changed to make it economically attractive?

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Financial Management, Finance

Category:- Financial Management
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