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You have proposed that your company invest in an automated inspection tool to improve product quality and reduce the time to inspect your most successful

You have proposed that your company invest in an automated inspection tool to improve product quality and reduce the time to inspect your most successful product. The machine will cost $25,000 and will have a useful life of 10 years. Annual operating and maintenance costs are $500 per year. You've estimated that the anticipated quality improvements will produce an annual savings of $1800 from reduced returns and new revenues of $2200 each year. At the end of its useful life you anticipate a $3500 salvage value. Assume i=10% and find the CR(i), AEC(i), and AE(i). Which of the following best represents the decision your company should make regarding investing in this new tool?

Yes invest as CR(10%)=$4348, AEC(10%)=$348, AE(10%)= $3848 per year

Do not invest as CR(10%)=$4348, AEC(10%)=$3848, AE(10%)= $3848 per year

Do not invest as CR(10%) = $3,848, AEC(10%) = $4,348 and AE(10%) = -$348 per year

Yes invest as CR(10%)=$3,848, AEC(10%)=$4348, AE(10%)= -$348 per year

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