Mercedes is considering upgrading their existing manufacturing line with state-of-the-art robotics. They will start with a pilot project at a single plant, and will assess profitability and potential scalability following the pilot. Your branch has been chosen as the pilot project test site, and you (the manager of the plant) need to assess your budget before launch the pilot. The installed cost of the new machinery is $200,000 and is expected to last for 10 years. The salvage value is expected to be $2.5x10,000 in today's dollars. Revenue is expected to increase by $40,000 while operating costs are expected to increase $5000 (both actual). Determine the present worth of the project, assuming an (actual) MARR of 12%, a CCA rate of 12% and a corporate tax rate of 25%.
Mercedes is considering upgrading their existing manufacturing line with state-of-the-art robotics. They will start with a pilot project at a single plant, and will assess profitability and potential scalability following the pilot. Your branch has been chosen as the pilot project test site, and you (the manager of the plant) need to assess your budget before launch the pilot. The installed cost of the new machinery is $200,000 and is expected to last for 10 years. The salvage value is expected to be $2.5x10,000 in today's dollars. Revenue is expected to increase by $40,000 while operating costs are expected to increase $5000 (both actual). Determine the present worth of the project, assuming an (actual) MARR of 12%, a CCA rate of 12% and a corporate tax rate of 25%.
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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Transcribed Image Text:Mercedes is considering upgrading their existing manufacturing line with state-of-the-art robotics. They will start
with a pilot project at a single plant, and will assess profitability and potential scalability following the pilot. Your
branch has been chosen as the pilot project test site, and you (the manager of the plant) need to assess your
budget before launch the pilot.
The installed cost of the new machinery is $200,000 and is expected to last for 10 years. The salvage value is
expected to be $2.5x10,000 in today's dollars.
Revenue is expected to increase by $40,000 while operating costs are expected to increase $5000 (both actual).
Determine the present worth of the project, assuming an (actual) MARR of 12%, a CCA rate of 12% and a
corporate tax rate of 25%.
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