Tony Setimi, president of Solidex Machinery, is considering the purchase of an automated stamping machine. In reviewing the figures prepared by the production department, Tony has noted that the machine would cost \(\$ 500,000\) plus another \(\$ 80,000\) for controls and programming. In addition, the production department estimates that the machine would cost \(\$ 3,000\) a month to maintain. Further, the production department estimates that repairs totaling \(\$ 45,000\) would be required at the end of seven years.

Tony gave the figures to Becky Roberts, the controller, and asked her to analyze the situation and be prepared to offer her opinion in the morning. Becky determined that the new machine would replace six workers and save \(\$ 108,000\) a year in labor costs. She also determined that \(\$ 6,500\) a year in scrap costs could be avoided and that the current equipment being replaced could be sold for \(\$ 12,000\). She then calculated depreciation on the new machine, assuming it would last 12 years and have a residual value of \(\$ 20,000\). She noted that the company's current cost of capital is \(11 \%\).

\section*{Required}

A. Compute the net annual cost savings that would be realized from the new machine (Ignore income taxes.)

B. Using the data from requirement (A) and information from the problem, compute the new machine's net present value. (Ignore income taxes.)

C. Assume that there are intangible benefits such as reduced setup time, improved quality, and greater flexibility of production. What annual dollar value would the company have to assign to these intangible factors in order to make the new machine an acceptable investment?