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 $$55,500$ per year. A self$-$serve checkout machine would reduce part$-$time student wages by $$35,500$ per year. The machine would cost $$250,000$ and has a $10-$year useful life. Total costs of operating the checkout machine would be $$5,100$ per year, including maintenance. Major maintenance would be needed on the machine in five years at a total cost of $$10,100.$ The salvage value of the checkout machine in $10$ years would be $$40,500.$

The CCA rate is $25\%.$ Management requires a $9\%$ after$-$tax return on all equipment purchases. The company$$s tax rate is $30\%.$

Required:

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

$2-$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.$)$

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

multiple choice

Yes

No