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Bobloblaw Manufacturing is considering the purchase of an automated parts handler for the assembly and test area of its Pittsburgh, PA , plant. The handler
Bobloblaw Manufacturing is considering the purchase of an automated parts handler for the assembly and test area of its Pittsburgh, PA plant. The handler will cost $ to purchase and another $ to install. If the company undertakes the investment, it will automate part of the semiconductor and test area, reducing operating costs by $ per year for the next ten years. Five years into the life of the project, however, Bobloblaw will have to spend an additional $ to update and refurbish the handler. The handler will be depreciated straightline to zero over years, and the additional investment refurbishing costs will also be depreciated straightline to zero over the last years of the project. After years, the handler is expected to be worth $ to a buyer of these used machines. Bobloblaw's tax rate is and its opportunity cost of capital is Answer the following questions:
a Is this a good project for Bobloblaw? Explain your answer.
b Create a data table and graph showing how NPV changes with the discount rate sometimes called an NPV profile What can you tell about the project from this?
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