Problem 13-20 Net Present Value Analysis; Uncertain Cash Flows [L0132, Lo13-41 I'm not sure we should lay out $250,000 for that automated Company. "That's a lot of money, and it would cost us $80,000 for software and installation, and another $36,0oo maintain the thing. In addition, the manufacturer admits it would cost $45,000 more at the end of three years to replace worn-out parts." welding machine, said Jim Alder, president of the Superior Equipment I admit it's a lot of money," said Franci Rogers, the controller. "But you kn This ow the turnover problem we've had with the welding crew machine would replace six welders at a cost savings of $108,000 per year. And reduced material waste. When you figure that th our 16% required rate of return." we would save another $6,500 per year in e automated welder would last for six years, I'm sure the return would be greater than "I'm still not convinced; countered Mr. Alder. "We can only get $12,000 scrap value out of our old welding equipment if we sell it now. nd in six years the new machine will only be worth $20,000 for parts. But have your people work up the figures and we'll alk about them at the executive committee meeting tomorrow. Click here to view Exhibit 138-1 and Exhibit 138-2, to determine the appropriate discount factorfs) using tables. Required: 1. Compute the annual net cost savings promise d by the automated welding machine a. Using the data from (1) above and other data from the problem, compute the automated welding machine's net present value. 2b. Would you recomm 3. Assume that management can id end purchasing the automated welding machine? entify several intangible benefits associated with the automated welding machine, including eater flexibility in shifting from one type of product to another, improved quality of output, and faster delivery as a result of reduced gre throughput time. What the new welding machine an acceptable investment? t minimum dollar value per year would management have to attach to these intangible benefits in order to make