Jack McGuire has been with Bulk Productions Group (BPG) for 14 years. McGuire decides to start slow with a project testing the increased automation of their horse feed line. Below are the projected cost of the expansion in automation, given a 5 year useful life of the robotic equipment: Direct Cost of Automation Purchase price of new robotic equipment $1,450,000 Sales tax on equipment $87,000 Shipping cost of equipment $63,000 Equipment installation $175,000 Software $98,000 Initial system and equipment testing $25,000 Equipment scrap value after five years $70,000 Annual Warranty Service Contract $21,000 robotics proposal one plant supervisor position with a salary of $98,000 per year. Two machine will need to be hired at $41,000 each.  The automation and related electronics will increase energy usage by $126,000 per year. The software will create an expected savings of $210,000 per year  Automation efficiencies will create a one-time $150,000 cost reduction in BPG's inventory stored in their warehouse.  Automation will replace 25,000 labor hours per year costing $16 per hour. BPG's International Home Office in Cedar Rapids, Iowa expects a 16% return on any new investments in production. Question is: Summarize the net present value of all cost, comparing the cost of expanding automation to the cost of 25,000 labor hours. Given the net present value of the two alternatives, should BPG expand automation to the horse feed operation? Discuss your results. This discussion is well beyond just the numbers…what do these results mean? How will accepting or rejecting this project affect the company's future (discuss all aspects of the change, not just cost)?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

ASAP please!!! Jack McGuire has been with Bulk Productions Group (BPG) for 14 years. McGuire decides to start slow with a project testing the increased automation of their horse feed line. Below are the projected cost of the expansion in automation, given a 5 year useful life of the robotic equipment:

Direct Cost of Automation

Purchase price of new robotic equipment

$1,450,000

Sales tax on equipment

$87,000

Shipping cost of equipment

$63,000

Equipment installation

$175,000

Software

$98,000

Initial system and equipment testing

$25,000

Equipment scrap value after five years

$70,000

Annual Warranty Service Contract

$21,000

robotics proposal one plant supervisor position with a salary of $98,000 per year. Two machine will need to be hired at $41,000 each.  The automation and related electronics will increase energy usage by $126,000 per year. The software will create an expected savings of $210,000 per year  Automation efficiencies will create a one-time $150,000 cost reduction in BPG's inventory stored in their warehouse.  Automation will replace 25,000 labor hours per year costing $16 per hour. BPG's International Home Office in Cedar Rapids, Iowa expects a 16% return on any new investments in production.

Question is:

Summarize the net present value of all cost, comparing the cost of expanding automation to the cost of 25,000 labor hours. Given the net present value of the two alternatives, should BPG expand automation to the horse feed operation? Discuss your results. This discussion is well beyond just the numbers…what do these results mean? How will accepting or rejecting this project affect the company's future (discuss all aspects of the change, not just cost)?

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 2 images

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education