Question
Use the following information for the next THREE parts. Suppose we are considering automating some part of an existing production process. The necessary equipment costs
Use the following information for the next THREE parts.
Suppose we are considering automating some part of an existing production process. The necessary equipment costs $80,000 to buy and install. The automation will save $22,000 per year (before taxes) by reducing labor and material costs. For simplicity, assume that the equipment has a five-year life and is depreciated to zero on a straight-line basis over that period. It will actually be worth $30,000 in five years. Should we automate? The tax rate is 21% and the discount rate is 10%.
A.) Calculate the CFFA in Yr 0.
Group of answer choices
-10000
-80000
-90000
-11000
B.) Calculate the CFFA in Yr 1.
Group of answer choices
20740
20140
21160
19350
23870
24320
C.) Calculate the CFFA in Yr 5.
44440
40910
37550
39640
42320
46290
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started