Question
Please Ans it ASAP The All-Weather Gear Company is considering automating its needle-stitching system at a cost of $30,000. The firm expects to phase out
Please Ans it ASAP
"The All-Weather Gear Company is considering automating its needle-stitching system at a cost of $30,000. The firm expects to phase out the new stitching system at the end of 5 years due to changes in style. At that time, the firm could scrap the system for $4,000 in today's dollars. The expected net savings (revenue - expenses) due to automation also are in today's (constant) dollars: Year 1 $29,000; Year 2 $20,000; Years 3-5 $19,000. Use the 5-year MACRS to depreciate the system. The general inflation rate over the next 5 years is 3% per year. Assume the net savings and the scrap value are subject to this inflation rate. The firm's inflation-free MARR is 12%. The firm's tax rate is 21%. What is the net present value of this automation system? Don't forget to use the market interest rate!"
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