"I'm not sure we should lay out $310.000 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 $86,000 for software and installation, and another $50.400 per year just to maintain the thing. In addition, the manufacturer admits it would cost $49.000 more at the end of three years to replace wom-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 $116,000 per year. And we would save another $7.700 per year in reduced material waste. When you figure that the automated welder would last for six years, I'm sure the return would be greater than our 13% required rate of return." "I'm still not convinced, countered Mr. Alder. "We can only get $18,000 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $32.000 for parts. But have your people work up the figures and we'll talk about them at the executive committee meeting tomorrow:" Use attached tables to determine the app opriate discount factor(s). 1. Compute the annual net cost savings promised by the automated welding machine. (6 marks) 2 Using the data from Required 1 and other data from the problem. compute the automated welding machine's net present value. ( 5 marks) Present value of annuity $1 at 13,6 years =39975 3. Would you recommend purchasing the automated welding machine? ( 5 marks)