KenAllen, capital budgeting analyst for BallyGears, 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 $512,000 (in today'sdollars) over the next 5 years. The existing robotics would produce benefits of $368,000 (today's dollars) over that same time period. An initial cash investment of $204,800 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginalcost-benefit analysis techniques to determine thefollowing:

a.The marginal benefits of the proposed new robotics.

b.The marginal cost of the proposed new robotics.

c.The net benefit of the proposed new robotics.

d.What should Ken recommend that the companydo? Why?

e.What factors besides the costs and benefits should be considered before the final decision ismade?