robotics used on the heavy truck gear line will produce total benefits of $516,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $387,000 (also in today's dollars) over that same time period. An initial cash investment of $206,400 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginal cost-benefit
Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the
robotics used on the heavy truck gear line will produce total benefits of $516,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $387,000 (also in today's dollars) over that same time
period. An initial cash investment of $206,400 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginal cost-benefit analysis
techniques to determine the following:
a. The marginal benefits of the proposed new robotics.
b. The marginal cost of the proposed new robotics
c. The net benefit of the proposed new robotics.
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