Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $ 577,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $ 378,00 (also in today's dollars) over that same time period. An initial cash investment of $ 230,800 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $ 71,000.

Show how Ken will apply marginal cost-benefit analysis techniques to determine the following:

A) The marginal (added) benefits of the proposed new robotics is $ ________ ROUND TO NEAREST DOLLAR

B) The marginal (added) cost of the proposed new robotics is $ ____________ NEAREST DOLLAR

C) The net benefit of the proposed new robotics is $ _________________ NEAREST DOLLAR

D) What should Ken recommend that the company do? Why? choose from the following

1) To not replace the existing robotics because net profit is positive

2) Replace the existing robotics becasue the net profit is positive

E) What factors besides the costs and benefits should be considered before the final decision is made? CHOOSE ALL THAT APPLY FROM BELOW

a) MAKE SURE SUNK COSTS ARE INCLUDED

b) What will be the energy consumption of the new robotics

c) Whether even better robotics may be available in a dhort while

d) Whether there will be additional training necessary with the new robotics