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 will result in a savings of 29,000 direct labor-hours each year. The labor rate is $15 per hour. Also, the smoother work flow made possible by the use of automation will allow the company to reduce the amount of inventory on hand by $418,000. 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 17% required rate of return. Click here to view and 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 $418,000 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 $93,000 more than estimated and direct labor could only be reduced by 22,000 hours per year, rather than the original estimate of 29,000 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 following are intangible 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 benefits in part 4(a) for the automated equipment to yield a 17% rate of return. Determine the annual net cost savings if the robot is purchased. (Do not include the $418,000 inventory reduction or the salvage value in this computation.) Compute the net present value of the proposed investment in the robot. (Round your final answer to the nearest whole dollar amount.) Based on these data, would you recommend that the robot be purchased? Yes Assume that the robot is purchased. However, due to unforeseen problems, software and installation costs were $93,000 more than estimated and direct labor could only be reduced by 22,000 hours per year, rather than the original estimate of 29,000 hours. Assuming that all other cost data is accurate, what would a postaudit suggest is the actual net present value of this investment? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Does it appear that the company made a wise investment? Yes hich of the following are intangible benefits associated with the new automated equipment? (Select which of the following atements (is) are true by selecting an "X".) 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 benefits in part 4(a) for the automated equipment to yield a 17% rate of return. (Round your final answer to the nearest whole dollar amount.) EXHIBIT 14B-1 Present Value of $1;1(1+r)n EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; 1r[11(1+r)n]
