Saxon Products, Incorporated; Is investigating the purchase of a robot for use on the company's assembly line. Selected data relating to the robot are provided below: In addition to the data above, engineering studies suggest that use of the robot wilt resuit in a savings of 25,000 direct labor hours each yean. The labor rate is $16 per hour. Also, the smoother work flow made possible by the use of automation will atlow the company to reduce the amount of inventory on hand by $41.000. This inventory reduction will take place at the end of the first year of operation, the released funds will be avolloble for use elsewhere in the company. Saxon Products tias a 19% required rate of return. Cick here to view Exhibit128- and Exhibit 1282 , to determine the appropriate discount factor(s) using tables. Required: 1. Determine the annual net cost savings if the robot is purchased. (Do not include the $414,000 inventory reduction or the salvage value in this computation) 2. Compite the net present value of the proposed investment in the robot. 2. . Based on these data, would you recommend that the robot be purchased? 3.a. Assume that the robot is purchased. However, due to unforeseen protgems, software and installation costs were $89.000 more than estimated and dliect labor could only be reduced by 19,500 hours per year, rather than the original estimate of 25,000 hours. Assuming that all other cost data is accurate, what would a postaudit suggest is the actual net present value of this investment? 3-b. Does it appear that the company made a wise investment? 4.a. Which of the foliowing are intangible benefits associated with the new automated equipment? Required: 1. Determine the annual net cost savings if the robot is purchased. (Do not include the $414,000 inventory reduction or the salvage value in this computation. 2 a. Compute the net present value of the proposed investment in the robot. 2.b. Based on these data, would you recommend that the robot be purchased? 3-a. Assume that the robot is purchased. However, due to unforeseen problems. software and installation costs were $89.000 more than estimated and direct labor could only be reduced by 19,500 hours per year, rather than the original estimate of 25,000 hours. Assuming that all other cost data is accurate, what would a postaudit suggest is the actual nel present value of this investment? 3. Does lt appear that the company made a wise imvestment? 4-a. Which of the foliowing are intanglble benefits associated with the new automated equipment? 4 b. Based on your analysis in Requirement 3 above. compute for the president the minimum dollar amount of annual cash inflow that would be needed from the benelits in part 4(a) for the automated equipment to yleld a 199 rate of return. Complete this question by entering your answers in the tabs below. Determine the annual net cost savings if the robot is purchased. (Do not incible the $114,000 inventory reduction or the filvage value in this computation.)
