Managerial Accounting 14-04

\"I'm not sure we should lay out $370,000 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 $98,000 for software and installation, and another $64,800 per yearjust to maintain the thing. In addition, the manufacturer admits it would cost $61,000 more at the end of three years to replace wornout 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 $128,000 per year. And we would save another $8,900 per year in reduced material waste. When you gure 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 $24,000 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $44,000 for parts. But have your people work up the gures and we'll talk about them at the executive committee meeting tomorrow." Click here to view Exhibit 143-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: 1. Compute the annual net cost savings promised by the automated welding machine. 2a. Using the data from Required 1 and other data from the problem, compute the automated welding machine's net present value. 2b. Would you recommend purchasing the automated welding machine? 3. Assume that management can identify several intangible benets associated with the automated welding machine, including greater exibility in shifting from one type of product to another, improved quality of output, and faster delivery as a result of reduced throughput time. What minimum dollar value per year would management have to attach to these intangible benets in order to make the new welding machine an acceptable investment? Complete thls questlon by entering your answers In the tab: below. Reql ' Req 2A Assume that management can identify several intangible benets associated with the automated welding machine, including greater exibility in shitting from one type of product to another, improved quality of output, and faster delivery as a result of reduced throughput time. What minimum dollar value per year would management have to attach to these intangible benets in order to make the new welding machine an acceptable investment? (Round your nal answer to the nearest whole dollar amount.) Show lessA