Answered step by step
Verified Expert Solution
Question
1 Approved Answer
An assembly operation at a software company currently requires $104,000 per year in labor costs. A robot can be purchased and installed to automate this
An assembly operation at a software company currently requires $104,000 per year in labor costs. A robot can be purchased and installed to automate this operation, and the robot will cost $200,000 with no MV at the end of its 10-year life. The robot, if acquired, will be depreciated using SL depreciation to a terminal BV of zero after 10 years. Maintenance and operation expenses of the robot are estimated to be $71,000 per year. The company has an effective income tax rate of 35%. Invested capital must earn at least 9% after income taxes are taken into account. a. Use the IRR method to determine if the robot is a justifiable investment. b. If MACRS (seven-year recovery period) had been used in Part (a), would the after-tax IRR be lower or higher than your answer to Part (a)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started