The Hub Store at a university in eastern Canada is considering purchasing a self$-$serve

checkout machine similar to those used in many grocery stores and other retail

outlets. Currently the university pays part$-$time wages to students totalling $$63,500$ per

year. A self$-$serve checkout machine would reduce part$-$time student wages by

$$43,500$ per year. The machine would cost $$410,000$ and has a $10-$year useful life.

Total costs of operating the checkout machine would be $$6,700$ per year, including

maintenance. Major maintenance would be needed on the machine in five years at a

total cost of $$11,700.$ The salvage value of the checkout machine in $10$ years would be

$$48,500.$

The CCA rate is $25\%.$ Management requires a $9\%$ after$-$tax return on all equipment

purchases. The company's tax rate is $30\%.$

Required:

Determine the before$-$tax net annual cost savings that the new checkout machine

will provide.

Net annual cost savings

$2-$a$.$ Using the data from $(1)$ above and other data from the exercise, compute the

checkout machine's net present value. $($Hint$.$ Use Microsoft Excel to calculate the

discount factor$($s$).)($Do not round intermediate calculations and round your final

answer to the nearest dollar amount. Negative value should be indicated with

minus sign.$)$

Net present value

$2-$b$.$ Would you recommend that the machine be purchased?

Yes

No