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A new broad-spectrum blood analyzer will allow ABC Clinic to earn additional test fees of $60,000 a year for the analyzer's estimated 6-year technical life.
A new broad-spectrum blood analyzer will allow ABC Clinic to earn additional test fees of $60,000 a year for the analyzer's estimated 6-year technical life. The analyzer will cost $183542, including delivery and installation, and will be depreciated using the 5-year MARCS method (20.00%, 32.00%, 19.00%, 12.00%, 12.00%, and 5.00%). There is a space available in the laboratory that has no other use for the next 3 years, thereafter a yearly cost of $183 will have to be charged. The existing technician can do the tests in about the same time it presently takes to send out the samples for the new machine. The technician earns $160 per day and will spend only 5% of his time with the new machine. It will be necessary to send the technician to a school at the beginning of the project to train him to learn how to operate the machine and it will cost $1,000. During his training period, a temporary replacement must be hired at a cost of $1,200. The firm's tax rate is 35 percent, and its overall weighted average cost of capital is 11 percent. Is the analyzer attractive?
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