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What is the net present value of the proposed investment

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Reference no: EM133178349

Question - Redbird Inc. is considering the purchase of a robot for use on the company's assembly line. Selected data relating to the robot are provided below:

Purchase price of the robot $1,200,000

The annual savings in labor costs ?

The annual increase in power and maintenance costs $37,500

Salvage value in 5 years $70,000

Useful life 5 years

Engineering studies suggest that the use of the robot will result in a savings of 23,000 direct labor hours each year. The labor rate is $16 per hour. The Redbird has a 10% required rate of return.

Required -

1. If the company purchases the robot, what will the annual net saving in $ be? (Hint: Do not include the one-time purchase price/installation, or salvage value; no rounding is needed.)

2. What is the net present value of the proposed investment in the robot in $? (Do not round your intermediate calculations. Round your final answer to the nearest integer.)

Reference no: EM133178349

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