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"I'm not sure we should lay out $265,000 for that automated welding machine." said Jim Alder, president of the Superior Equipment Company. "That's a lot of money, and it would cost us $78,000 for software and installation, and another $40,800 per year just to maintain the thing. In addition, the manufacturer admits it would cost $41,000 more at the end of three years to replace worn-out parts." "admit it's a lot of money," said Franci Rogers, the controller. "But you know the turnover problem we've had with the welding crew. This machine would replace six welders at a cost savings of $108,000 per year. And we would save another $6,900 per year in reduced material waste. When you figure that the automated welder would last for six years, I'm sure the return would be greater than our 19% required rate of return." "I'm still not convinced" countered Mr. Alder. "We can only get $14,000 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $24.000 for parts. But have your people work up the figures and we'll talk about them at the executive committee meeting tomorrow." Click here to view Exhibit78-1 and Exhibit 7B-2. to determine the appropriate discount factors) using tables. Required: 1. Compute the annual net cost savings promised by the automated welding machine. 2a. Using the data from (1) above and other data from the problem, compute the automated welding machine's net present volue. 2b. Would you recommend purchasing the automated welding machine? 3. Assume that management can identify several intangible benefits associated with the automated welding machine, including greater flexibility in shifting from one type of product to another, improved quality of output, and faster delivery as a result of reduced throughput time. What minimum dollar value per year would management have to attach to these intangible benefits in order to make the new welding machine an acceptable Investment? EXHIBIT 78-1 Present Value of Star NEZ 8 Periods as 89 9 11 129 1% 16 17 16 19 20% 21% 225 24 25 1 0962 0952 0943 0935 0926 0917 0909 0.901 0893 0885 0877 0870 0.862 0855 0847 08400833 0825 0.820 080 08060.800 2 0925 0907 08900873 08570842 0826 0.812 0797 0783 0769 0756 0743 0731 078 0706 0694 063 0672 0661 0650 0.600 3 0889 0854 0800 08% 0794 072 0751 0731 072 0.093 0675 0658 0641 0624 0509 0593 0579 0.564 0551 0537 0.5240512 0855 0823 07920763 0735 0708 0683 0659 0636 0613059205720552 0534 0516 0499 0.482 04670451 0437 0423 0410 5 0822 0.784 0747 0.713 0681 0650 0621 0.593 0557 0543 0519 0497 0.476 0456 0437 04190402 0386 03700355 03410328 6 0790 0746 0705 0666 0630 059 0564 0535 0507 040 0456 0432 04100290 0370 0352 0335 0319 03030289 0275 0262 7 0760 07110665 0.623 051 0547 05130482 0652 0425 0400 0376 0354 0333 0314 0296 0279 0.263 0.249 0235 0.222 0210 0731 067 0627 0.582 0540 0502 04670434 0404 0376 0351 0327 0305 0285 0266 0249 0233 0218 0204 0191 01790158 9 070306450592 054 0500 0060 0424 0.391 0361 0333 0308 0284 0263 0243 0225 0209 0194 01800167 0155 014 0131 0676 0614 055 0500403 0422 03 0.352 0.22 0295 0270 0247 0227 0208 0191 0176 01620149 037 0126 0116 0107 11 0650 055 05270475 0429 0988 0350031202870 261 0237 0215 0.195 0178 0152 048 0135012301120102 0094 0086 12 0625 0557 0497 0.414 0397 0.356 0.319 0.286 0257 0231 0208 0187 016 0152 0137 0124 011201020092 000 0076 0069 0601 0530 09 0415 0368 0326 0290 0258 0229 0204 012 016 015 0130 01 01040093 DORA 0075 0068 0061 0055 14 0577 0505 042 0388 0340 0299 0.23 0.232 0205 0141 060 0111 0125 111 0099 008 0078 0069 0062 0055 0049 0014 15 0.555 041 0417 02 05 0275 0239 0209 013 OKO 0140011010 0005 O ORA 0074 0065 0057 0051 0045 0000 0035 05 0454 OM 03 0292 0252 02 0188 043 041 012 0807 009 008 007 0062 0056 0047 004200360032 0028 12 0511 0.43603031702200221 019 010 016 0125. 010 0091 000 0000 0060 0,052 0045 000 0034 0030 0026 0021 th 0.4 0.4 0.250 00250 0212 080 0153 0110 011 0095 081 000 0.05) 0051 0044 001 002 0028 007 002 001 1 045 0.396 0301 02 0232 0994 OM 013 9800040083 000 0000 0000430097 003 002 003 0.020001 OOM 20 0.456 0.17 0.32 0.258 0215 0178 019 0124 000R7 0073 0061 0051 000 0097 003 0026 0022 0.00016 008 0012 21 033 0358 0.294 0242 0199 0164 0135 01120093 007 0064 005 0044 0.037 0031 0:026 0022 001 0015 001 0011 0006 0422 0.22 02780226 0184 0150 0123 0101 003 0068 0056 004 003 002 0026 0022 008 005 001 0011 00000007 23 0406 0.125 0202 0211 01700138 011700910074 0000 0049 040 0030 0027 0022 0.018 00150012 000 0009 0.007 0.000 20 0390 0310 027 097 015 0126 0102 0.00066 005 0013 0039 0028 002 0019 0015 00 00 0.00 0.007 00060005 25 03250396 020640106 0116 0092 0.074 005 0047 0038 0020, 0024 00200016 0.00 0010 0.000 0.007 0006 0005 0.004 20 0361 0281 0220 0172 013501060084 0066 005 0042 0013 0026 0021 0.01 0054 000 0009 0.007 0.005 0.005 0.000 0.003 27 0:37 0268 0207 0161 0125 0058 000 0000 0042 003 0029 0023 0018 OOM 001 000 000 0005 00050004 00030002 28 om 0255 0.6 0150 0116 0.090.0.060.0054 0012 003 0026 00200016 0012 0010 0000 0000 000 0000 0.003 00020002 29 02210243 01 0110101 002 0063 004 0037 0.029 0022 001 00 001 000 0006 0.005 0.004 000 0002 0.002 0002 30 03 02 01 011000075 0057 0001 002 002600200015 0012 0000 0.007 0.005 0004 0003 000 0002 0002 0001 40 0208 020097 0.067 004 00120022 005 0011 0008 0005 0004 0000 0.002 0.001 0001 0.001 0.000 0.000 0.000 0.000 0.000 EXHIBIT 70-2 Present Value of an Annuity of Sin Arruar 16 E 9 6 Parlots to 5 71 8 TH 29 155 17 18% 1930 205 215 2212 20 25 1 0.962 0952 0943 0935 096 0917 0909 090 0893 085 0770870 0462 085508470840 01 08260820005 0800 2 1833 1808 1783 1759 1735 170 1690 1668 1667 1626 1605 155 156 1547 1528 1509 1482 147 14571440 2775 2723 2673 2624 257 2571 2487 246 2402 2361 2322 2283 2246 2210 214 210 2106 2074 2012 2011 191 1952 4 3630 546 65 2382 3312 320 3170 302 3037 294 2014 2.855 2.738 273 269) 2539 2589 2540 241 2418 2404 2360 5 4452 4.32942124100 3.9983890 3.791 3696 1605 357 3431 352 3274 3199 3127 3058 2991 2925 2864 2807 2745 2.689 5242 50764977 4767 462 4486 4355 4231 411 1998 389 3784 385 3589 340 34103203245 31671092 1020 251 7 60025786558252295206 5033 486 472 4564 4423 428 41604039 1922 3812 37061505 1508 346 327 322 1161 R 6.733 6.463 62105.971 5707 5535 53355114968 4799 169 4487 434 4207 40783954 17 3726 3619 3578 2431 129 145 2008 6802 655 62425995 5759 5532 5328 511249464772 4602 4451 4303 43 40313905 376 167335663462 10 111 7722 7360 7024 6.70 6.GR 614558 5650 5426 52% 5019 433 4659 4494 439 4492 40543923 1799362 1571 11 8.70 306788274997139 6805 6.6956207 5938 568 5453 524 5.025 486 4656 4486 4327 417 40.5 3902 3762655 12 938588381741 7536771 68% 492 614 597 5660 5421 5197 4988 4793 4611 409 4278 427 395 3851 3775 13 99569994885387904 747 7103.750 4M 6122 5.842 558 542 54910 475 4530 4162 4203 40533912 3780 14 10563 98999295445 #244 26 7367 06628 63026002 574 5468 5229 5008 407 46114432 4265 408 392 1826 15 TI 107900712 553 806176067164026142 SR 5575 5324 502 486 4675 449 415 41534001 159 16 11652 OSH 101091851 8213247379676604 62655954 5668 5405 532 498 47104536 4357 499 4033 17 1211241047137630122 854402225471206720 6373 6042 570 5475 5.222 4900 4775 457649 4219 4059 3910 12659 160 10828100589372 8756201 702 7250 630 6467 128 588 5534 5273 5033 412 4.60844194203 40803928 M20511158 103369604050657) 23666.93655061057 58 59 5070 4 465 442 4263 409 1M2 20 50040211470 1019 0929 516 2961 746 7025 607 6250 529 562 5.3 5101 70 657 4460 4.279 410 954 21 M028 2114 017 0252 645 0752562 7102667625935654524675 476 422 4 1963 22 151 16000 11001 2772 116 7645 710 674 60 6016 : 45M909 490 44302400 1970 1857 1140 11227950 RR 266 2711 72806292660472355164925 4201 449 4U/ 24 1524111790 950 110525 707 953487784 72065644 con 1746 451 518 4 45074451 25 1522 10 12.7) 1654 1067593077422772306364646097 5766 0655 44754 412105 90 1592 1003 1826 1010 1929 16 78967372 6005 66 671 5740 5206 49564728 4520430415135 22 16380 64 21 192 1093510027 92375487 7409 60 654 6136 5798 582 5215 4064 474 4524 4245410 20 16.628 3.406 D1105110116 9307 607 7984 7441 561 654 615 5810 512522349707 458 415729 16 15 141 51 228 11158 10158 30 8650 8022 7406065516166 5820 5510 52294975 405 4330 STM 1229215377 408 1175 102146055 749670086566 617 5829 551 523549994745 453463919 1904 1925 10257979951 246 7634 705 6042 6230 S 550 5258 4260 4300 00

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