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 $516,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $387,000 (also in today's dollars) over that same time period. An initial cash investment of $206,400 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginal cost-benefit analysis What should Ken recommend that the company do? Why? A. Replace the existing robotics because the net profit is negative. B. do not replace the existing robotics because the net profit is negative. What factors besides the costs and benefits should be considered before the final decision is made? Other factors that should be considered before the final decision is made are: (Choose all that apply.) A, the amount of energy consumption of the new robotics. B. whether even better robotics may be available in a short while. C. make sure sunk costs are included. D. whether there will be additional training necessary with the new robotics
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 $516,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $387,000 (also in today's dollars) over that same time
period. An initial cash investment of $206,400 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $72,000. Show how Ken will apply marginal cost-benefit analysis
What should Ken recommend that the company do? Why?
A. Replace the existing robotics because the net profit is negative.
B. do not replace the existing robotics because the net profit is negative.
What factors besides the costs and benefits should be considered before the final decision is made?
Other factors that should be considered before the final decision is made are: (Choose all that apply.)
A, the amount of energy consumption of the new robotics.
B. whether even better robotics may be available in a short while.
C. make sure sunk costs are included.
D. whether there will be additional training necessary with the new robotics.
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