Feldman Cages manufactures cages for pets. Joe, the VP of operations at Feldman Cages, is considering a major capital investment decision. It would cost \(\$ 2,000,000\) to put new, highly automated machines in the factory. The equipment would last about 20 years and would have no salvage value at the end of that period. The equipment will replace eight workers, saving Feldman \(\$ 200,000\) per year in direct labor. Operating and maintenance costs on the machines are expected to cost \(\$ 100,000\) per year. The automated equipment is expected to improve quality. Feldman's main competitors are installing similar equipment. If Feldman installs the equipment, its revenues are expected to remain steady. If Feldman chooses not to install the equipment, its contribution margin is expected to fall by \(\$ 200,000\) per year as a result of lower quality compared to its competitors. Feldman's discount rate is \(10 \%\) and its tax rate is \(30 \%\).

\section*{Required}

A. How much is Feldman expected to save each year if it installs the equipment (including tax effects)?

B. How much will Feldman lose each year if it does not install the equipment (including tax effects)?

C. Describe the moving baseline concept and how you would apply it to this problem.

D. Should Feldman purchase the new machines?