A car manufacturer is considering the purchase of an industrial robot for assembling cars. An employee who does the same tasks as the robot would do costs the company $60,000 in wages and benefits this year. Those costs are expected to increase by 5% annually over the next 10 years. A robot would cost $150,000, which includes initial purchase, installation, and training costs. The robot would cost $25,000 to operate in its first year, and costs are expected to increase by $2,000 each year. The company expects to be able to sell the robot at the end of 10 years for a salvage value of $10,000. If the company can earn 5% on its funds, then should the company purchase the robot? Of course, use calculations to justify your answer.

A car manufacturer is considering the purchase of an industrial robot for assembling cars. An employee who does the same tasks as the robot would do costs the company $60,000 in wages and benefits this year. Those costs are expected to increase by 5% annually over the next 10 years. A robot would cost $150,000, which includes initial purchase, installation, and training costs. The robot would cost $25,000 to operate in its first year, and costs are expected to increase by $2,000 each year. The company expects to be able to sell the robot at the end of 10 years for a salvage value of $10,000. If the company can earn 5% on its funds, then should the company purchase the robot? Of course, use calculations to justify your answer.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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