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4. (25 points) Five years ago, a pick and place robot was purchased for the express purpose of loading pieces into a machining large, complex parts used in commercial and military aircraft worldwide. It cost $400,000, had an estimated life of 15 years, and O&M costs of $45,000 for the first year, increasing by $1000 per year thereafter. The 5 years have been depreciated for tax purposes as MACRS-GDS 7-year property. The pick and place robot was originally thought to have a salvage value of $20,000 at the end of 15 years but is now believed to have a remaining life of only 8 years with a salvage value of $15,000 at that time. With business booming, the existing robot is no longer sufficient to meet production needs. It can be kept and supplemented by purchasing a new, smaller pick and place robot for $190,000 that will cost $40,000 per year for O&M, have a life of 10 years, and have a salvage value of $190,000(0.859 after years. As an alternative, a larger, faster, and with more degrees of freedom robot can be used alone to replace the current machine. It has a cash price without trade-in of $550,000, O&M costs of $54,000 for the first year, increasing 5% per year thereafter, and a 15-year life. The new scara robot will be acquired by financing 60% of the total cost with a loan to be repaid in 5 equal total annual payments at a rate of 6%. The existing pick and place robot can be sold on the open market for a maximum of $70,000. The salvage value of the new Scara robot is expected to be $550,000(0.759) after t years. The after-tax MARR is 12 percent, the tax rate is 40 percent, and the planning horizon is 8 years. , a. Clearly show the cash flow profile for each alternative using the insider's approach b. Using an EUAC and a cash flow (insider's viewpoint), decide which is the more favorable alternative using a planning horizon of 5 years. c. Using an EUAC, the insider approach, and assuming that Section 1031 like-kind property exchange is used, determine the more favorable alternative. 4. (25 points) Five years ago, a pick and place robot was purchased for the express purpose of loading pieces into a machining large, complex parts used in commercial and military aircraft worldwide. It cost $400,000, had an estimated life of 15 years, and O&M costs of $45,000 for the first year, increasing by $1000 per year thereafter. The 5 years have been depreciated for tax purposes as MACRS-GDS 7-year property. The pick and place robot was originally thought to have a salvage value of $20,000 at the end of 15 years but is now believed to have a remaining life of only 8 years with a salvage value of $15,000 at that time. With business booming, the existing robot is no longer sufficient to meet production needs. It can be kept and supplemented by purchasing a new, smaller pick and place robot for $190,000 that will cost $40,000 per year for O&M, have a life of 10 years, and have a salvage value of $190,000(0.859 after years. As an alternative, a larger, faster, and with more degrees of freedom robot can be used alone to replace the current machine. It has a cash price without trade-in of $550,000, O&M costs of $54,000 for the first year, increasing 5% per year thereafter, and a 15-year life. The new scara robot will be acquired by financing 60% of the total cost with a loan to be repaid in 5 equal total annual payments at a rate of 6%. The existing pick and place robot can be sold on the open market for a maximum of $70,000. The salvage value of the new Scara robot is expected to be $550,000(0.759) after t years. The after-tax MARR is 12 percent, the tax rate is 40 percent, and the planning horizon is 8 years. , a. Clearly show the cash flow profile for each alternative using the insider's approach b. Using an EUAC and a cash flow (insider's viewpoint), decide which is the more favorable alternative using a planning horizon of 5 years. c. Using an EUAC, the insider approach, and assuming that Section 1031 like-kind property exchange is used, determine the more favorable alternative

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