50.1K

Verified Solution

Link Copied!

Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does not indicate completion.

$1$

I he Hub Store at a university in eastern Canada is considering purchasing a selt$-$serve checkout machine similar to those used in many grocery stores and other retail outlets. Currently the university pays part$-$time wages to students totalling $$55,500$ per year. A self$-$serve checkout machine would reduce part$-$time student wages by $$35,500$ per year. The machine would cost $$250,000$ and has a $10-$year useful life. Total costs of operating the checkout machine would be $$5,100$ per year, including maintenance. Major maintenance would be needed on the machine in five years at a total cost of $$10,100.$ The salvage value of the checkout machine in $10$ years would be $$40,500.$

The CCA rate is $25\%.$ Management requires a $9\%$ after$-$tax return on all equipment purchases. The company's tax rate is $30\%.$

Required:

Determine the before$-$tax net annual cost savings that the new checkout machine will provide.

Answer is complete and correct.

Net annual cost savings

$$.30,400$

$2-$a$.$ Using the data from $(1)$ above and other data from the exercise, compute the checkout machine's net present value. $($Hint$.$ Use Microsoft Excel to calculate the discount factor$($s$).)($Do not round intepmediate calculations and round your final answer to the nearest dollar amount. Negative value should be indicated with minus sign.$)$

Answer is complete but not entirely correct.

Answer & Explanation Solved by verified expert

See Answer