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Nike Manufacturing is considering the purchase of an automated parts handler for the assembly and test area of its Philadelphia, PA , plant. The handler
Nike Manufacturing is considering the purchase of an automated parts handler for the assembly and test area of its Philadelphia, PA plant. The handler
will cost $ to purchase and another $ to install. If the company undertakes the investment, it will automate part of the semiconductor
and test area, reducing operating costs by $ per year for the next ten years. Five years into the life of the project, however, Nike will have to
spend an additional $ to update and refurbish the handler. The handler will be depreciated straightline to zero over years, and the
additional investment refurbishing costs will also be depreciated straightline to zero over the last years of the project. After years, the handler is
expected to be worth $ to a buyer of these used machines. Bobloblaw's tax rate is and its opportunity cost of capital is Answer the
following questions:
a Is this a good project for Bobloblaw? Explain your answer.
b Create a data table and graph showing how NPV changes with the discount rate sometimes called an NPV profile What can you tell about the
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