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 $56,000 per year. A self-serve checkout machine would reduce part-time student wages by $36,000 per year. The machine would cost $260,000 and has a 10-year useful life. Total costs of operating the checkout machine would be $5,200 per year, including maintenance. Major maintenance would be needed on the machine in five years at a total cost of $10,200. The salvage value of the checkout machine in 10 years would be $41,000.

The CCA rate is 25%. Management requires a 10% after-tax return on all equipment purchases. The companys tax rate is 30%.

1. a) Determine the before-tax net annual cost savings that the new checkout machine will provide.

Net annual cost savings:_______

1. b) Using the data from (1) above and other data from the exercise, compute the checkout machines 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 a minus sign.)

Net present value:________

1. c) Would you recommend that the machine be purchased?

o Yes

Or

o No

Please help me I am stuck