PROBLEM 13-29 Net Present Value; Uncertain Future Cash Flows; Postaudit [LO1, L03] "If we can get that new robot to combine with our other automated equipment, we'll have a complete flexible manufacturing system (FMS) in place in our Northridge plant," said Hal Swain, production manager for Diller Products. "Let's just hope that reduced labor and inventory costs can justify its acquisition," replied Linda Wycoff, the controller. "Otherwise, we'll never get it. You know how the president feels about equipment paying for itself out of reduced costs." Selected data relating to the robot are provided below: Engineering studies suggest that use of the robot will result in a savings of 20,000 direct laborhours each year. The labor rate is $16 per hour. Also, the smoother work flow made possible by the FMS will allow the company to reduce the amount of inventory on hand by $300,000. The released funds will be available for use elsewhere in the company. This inventory reduction will take place in the first year of operation. The company's required rate of return is 20%. Required: (Ignore income taxes.) 1. Determine the net annual cost savings if the robot is purchased. (Do not include the $300,000 inventory reduction or the salvage value in this computation.) 2. Compute the net present value of the proposed investment in the robot. Based on these data, would you recommend that the robot be purchased? Explain