$"$I$\text{'}$m not sure we should lay out $$325,000$ for that automated welding machine," said Jim Alder, president of the Superior Equipment Company. "That's a lot of money, and it would cost us $$89,000$ for software and installation, and another $$54,000$ per year just to maintain the thing. In addition, the manufacturer admits it would cost $$52,000$ more at the end of three years to replace worn$-$out parts."

"I admit it's a lot of money," said Franci Rogers, the controller. "But you know the turnover problem we've had with the welding crew. This machine would replace six welders at a cost savings of $$119,000$ per year. And we would save another $$8,000$ per year in reduced material waste. When you figure that the automated welder would last for six years, I$\text{'}$m sure the return would be greater than our $16\%$ required rate of return."

$"$I$\text{'}$m still not convinced," countered Mr$.$ Alder. $"$We can only get $$19,500$ scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $$35,000$ for parts. But have your people work up the figures and we'll talk about them at the executive committee meeting tomorrow."

Click here to view Exhibit $7$B$-1$ and Exhibit $7$B$-2,$ to determine the appropriate discount factor$($s$)$ using tables.

Required:

Compute the annual net cost savings promised by the automated welding machine.

$2$a$.$ Using the data from Required $1$ and other data from the problem, compute the automated welding machine's net present value.

$2$b$.$ Would you recommend purchasing the automater wing machine?

Assume that management can identify several intang greater flexibility in shifting from one type of product tc le benefits associated with the automated welding machine, including throughput time. What minimum dollar value per year w $$other$,$ improved quality of output, and faster delivery as a result of reduced the new welding machine an acceptable investment?

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Req $1,$Req$2A,$Req$3$

Using the data from Required $1$ and other data from the problem, compute the automated welding machine's net present value.

Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.

Net present value

$$,(145,118)$

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