Saxon Products, Incorporated, is investigating the purchase of a robot for use on its assembly line. Selected data relating to the

robot are provided below:

Using the robot will save $25,000$ direct labor$-$hours each year. The labor rate is $$16$ per hour. Also, the automated work flow

reduce inventories by $$400,000.$ This inventory reduction will take place at the end of the first year of operation; the released

funds will be available for use elsewhere in the company. Saxon Products has a $20\%$ required rate of return.

Click here to view Exhibit $14$B$-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor$($s$)$ using tables.

Required:

Determine the annual net cost savings if the robot is purchased. $($Do not include the $$400,000$ 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$.$ Should the robot be purchased?

$3-$a$.$ Assume the robot is purchased. However, due to unforeseen problems, software and installation costs were $$75,000$ more

than estimated and direct labor could only be reduced by $22,500$ hours per year, rather than the original estimate of $25,000$

hours. Assuming all other cost data are accurate, what would a postaudit suggest is the actual net present value of this

investment?

$3-$b$.$ Did the company make a wise investment?

$4-$a$.$ Which of the following are intangible benefits associated with the new automated equipment?

$4-$b$.$ Based on your analysis in Requirement $3$ above, compute the minimum dollar amount of annual cash inflow that would be

needed from the benefits in $($a$)$ above for the automated equipment to yield a $20\%$ rate of return.

Complete this question by entering your answers in the tabs below.

Required $2A$

Required $2B$

Required $3A$

Required $3$B

Required $4$A

Determine the annual net cost savings if the robot is purchased. $($Do not include the $$400,000$ inventory reduction or the

salvage value in this computation.$)$