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An assembly operation at PDR Truck Assembly currently requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this
An assembly operation at PDR Truck Assembly currently requires $100,000 per year in labor costs. A robot can be purchased and installed to automate this operation. The robot will cost $150,000 with no salvage value at the end of its 7-year life. The robot, if acquired, will be depreciated in 5 years. Annual maintenance and operation expenses of the robot are estimated to be $64,000 per year. The company has an effective income tax rate of 40%. Invested capital must earn at least 8% after taxes are taken into account. The company is using a declining balance method with a depreciation rate of 20% to depreciate the robot. Determine the present worth of the company's after-tax cash flows? (10 pt.)
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