"I'm not sure we should lay out $265,000 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 $75,000 for software and installation, and another $3,100 every month just to maintain the thing. In addition, the manufacturer admits that it would cost $38,000 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 $105,000 per year. And we would save another $6,600 per year in reduced material waste. When you figure that the automated welder would last for six years, l'm sure the return would be greater than our 19% required rate of return." "I'm still not convinced," countered Mr. Alder. "We can only get $12,500 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $21,000 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 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 2a. Using the data from (1) above and other data from the problem, compute the automated welding machine's net present value. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).) 2b. Would you recommend purchasing the automated welding machine? Yes No "I'm not sure we should lay out $265,000 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 $75,000 for software and installation, and another $3,100 every month just to maintain the thing. In addition, the manufacturer admits that it would cost $38,000 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 $105,000 per year. And we would save another $6,600 per year in reduced material waste. When you figure that the automated welder would last for six years, l'm sure the return would be greater than our 19% required rate of return." "I'm still not convinced," countered Mr. Alder. "We can only get $12,500 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $21,000 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 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables. Required: 2a. Using the data from (1) above and other data from the problem, compute the automated welding machine's net present value. (Any cash outflows should be indicated by a minus sign. Use the appropriate table to determine the discount factor(s).) 2b. Would you recommend purchasing the automated welding machine? Yes No