Question
The managerial finance function and economic value added (EVA). Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal.The
The managerial finance function and economic value added (EVA).Ken Allen, capital budgeting analyst for Bally Gears, Inc., has been asked to evaluate a proposal.The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of $560,000 (in today's dollars) over the next 5 years.The existing robotics would produce benefits of $400,000(also in today's dollars) over that same time period.An initial cash investment of $220,000 would be required to install the new equipment.The manager estimates that the existing robotics can be sold for $70,000.Show how Ken will apply marginal analysis techniques to determine the following:
- The marginal (added) benefits of the proposal new robotics.
- The marginal (added) cost of the proposed new robotics.
- The net benefit of the proposed new robotics.
- Whatshould Ken Allen recommend that the company do?Why?
- What factors besides the costs and benefits should be considered before the final decision is made?
so how do I resolve this problem?
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