Lor ADDITIONAL INFORMATION The robotic machine that is required to produce children's denim chairs that are later personalized with their name is expected to cost $1,100,000 and have a seven-year life. In year four it will be necessary to overhaul the electronics that go into the robotic arms is completed, the machine is expected at a cost of $95,000 After the overhaul to run another three years. GATSBY MANUFACTURING INC. is considering ng Objectives: At the end of this assignment you will be able to determine if management should accept a proposal to make a long-term investment in new equipment that will allow expansion to another product line. Core Concept Reviews Time Value of Money Capital Budgeting Techniques this investment but would like a return of 6% annually. It is expected that the equipment ould be sold at the end of its seven-year life for $30,000 the estimated value of its recycled component parts. Annual cash inflows for the new product are expected to be $240.000 Annual depreciation on the new equipment is calculated using the straight-line method. REQUIREMENTS 1. Review the additional information provided for Assignments 4, 5, and 6 on page 40. 2. Complete this table of the cash inflows and cash outflows related to this investment opportunity. In the "When" column indicate either today, years 1 through X for an annuity of X years, or a specific number representing the year in which that cash inflow or outflow will occur. Cash Flow Initial Investment Annual cash inflows Overhaul cost Salvage Value Payback Period in Years: Simple accounting rate of return: Net present value: Internal rate of return: Calculate the profitability index of this proposal and an alternative one that will result in a net present vale of $180,000 based on an investment of $900,000: Amount Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7