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 $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Ken Allen should recommend that the company: (Select the best answer below) a. to not replace the existing robotics because the net profit is positive b. replace the existing robotics because the net profit is positive Other factors that should be considered before the final decision is made are: (Choose all that apply A. What will the energy consumption of the new robotics. B.Make sure sunk costs are included. C.Whether even better robotics may be available in a short while 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 $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000. Ken Allen should recommend that the company: (Select the best answer below) a. to not replace the existing robotics because the net profit is positive b. replace the existing robotics because the net profit is positive Other factors that should be considered before the final decision is made are: (Choose all that apply A. What will the energy consumption of the new robotics. B.Make sure sunk costs are included. C.Whether even better robotics may be available in a short while D.Whether there will be additional training necessary with the new robotics
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
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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 $560,000 (in today's dollars) over the next 5 years. The existing robotics would produce benefits of $400,000 (also in today's dollars) over that same time period. An initial cash investment of $220,000 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $70,000.
Ken Allen should recommend that the company: (Select the best answer below)
a. to not replace the existing robotics because the net profit is positive
b. replace the existing robotics because the net profit is positive
- Other factors that should be considered before the final decision is made are: (Choose all that apply
- A. What will the energy consumption of the new robotics.
- B.Make sure sunk costs are included.
- C.Whether even better robotics may be available in a short while
- D.Whether there will be additional training necessary with the new robotics
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