Williams Furniture makes wood tables, mostly for schools. The process of sanding and finishing the wood table tops is very labor intensive. Mr$.$ Williams $($semi$-$retired owner$)$ saw an automated sander at a trade show he recently attended in Phoenix.

He has Ms$.$ James, the COO, to consider buying this new sander which costs $$25,000.$ Being a good delegator, she has aked that you, her new MBA wizard, prepare a financial analysis.

Ms$.$ James estimates that it could save about $10\%$ on labor costs.

The old sander has no book value but will probably be sold to a used equipment broker for $$2000.$

Williams has $$100,000$ in debt at $10\%$ and $$300,000$ in equity. Firms in this industry normally have a $20\%$ cost of equity.

Attached is the current P&L for Williams Furniture.

Ms$.$ James has asked you to do the following:

A$.$ Please prepare a pro forma income statement showing the impact of the new sander and calculate if the product is a good move $($do so using all the measures at your disposal$).$ She wants us to look out $5$ years, that's how long the sander will probably last.

B$.$ Ms$.$ James would like to know what happens if her estimate on labor savings is off $-$ what if it is $5\%$ or $15\%?$ A graph would be helpful.

C$.$ Lastly, Ms$.$ James would like your opinion about the project's worth. Which valuation method is best for making this decision?