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 $$57,500$ per year. A

self$-$serve checkout machine would reduce part$-$time student wages by $$37,500$ per year. The machine would cost $$290,000$ and has

a $10-$year useful life. Total costs of operating the checkout machine would be $$5,500$ per year, including maintenance. Major

maintenance would be needed on the machine in five years at a total cost of $$10,500.$ The salvage value of the checkout machine in

$10$ years would be $$42,500.$

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