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answer this The Hub Store at a university in eastern Canada is considering purchasing a self - serve checkout machine similar to those used in

answer this The Hub Store at a university in eastern Canada is considering purchasing a self-serve
checkout machine similar to those used in many grocery stores and other retail
outlets. Currently the university pays part-time wages to students totalling $65,000
per year. A self-serve checkout machine would reduce part-time student wages by
$45,000 per year. The machine would cost $440,000 and has a 10-year useful life.
Total costs of operating the checkout machine would be $7,000 per year, including
maintenance. Major maintenance would be needed on the machine in five years at a
total cost of $12,000. The salvage value of the checkout machine in 10 years would be
$50,000.
The CCA rate is 25%. Management requires a 10% after-tax return on all equipment
purchases. The company's tax rate is 30%.
Required:
Determine the before-tax net annual cost savings that the new checkout machine
will provide.
Net annual cost savings
2-a. Using the data from (1) above and other data from the exercise, compute the
checkout machine's net present value. (Hint. Use Microsoft Excel to calculate the
discount factor(s).)(Do not round intermediate calculations and round your final
answer to the nearest dollar amount. Negative value should be indicated with
minus sign.)
Net present value
2-b. Would you recommend that the machine be purchased?
Yes
No
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