Should eddie recommend that purchase of the robot

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Reference no: EM13179575

Eddie is a production engineer for a major supplier of component parts for cars. He has determined that a robot can be installed on the production line to replace one employee. The employee earns $20 per and benefits worth $8 per hour for a total annual cost of $58,240 this year. Eddie estimates this cost will increase 6% each year. The robot will cost $16,500 to operate the first year with costs increasing by $1500 each year. The firm uses an interest rate of 15% and a 10-year planning horizon. The robot costs $75000 installed and will have a salvage value of $5000 after 10 years. Should Eddie recommend that purchase of the robot?

Reference no: EM13179575

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