What should ken recommend that the company? do

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  Ken? Allen, capital budgeting analyst for Bally? Gears, Inc., has been asked to evaluate a proposal. The manager of the automotive division believes that replacing the robotics used on the heavy truck gear line will produce total benefits of ?$532,000 ?(in today's? dollars) over the next 5 years. The existing robotics would produce benefits of ?$441,000 ?(also in? today's dollars) over that same time period. An initial cash investment of $212,800 would be required to install the new equipment. The manager estimates that the existing robotics can be sold for $71,000.

Problem 1: Show how Ken will apply marginal? cost-benefit analysis techniques to determine the? following:

1. The marginal benefits of the proposed new robotics.

2. The marginal cost of the proposed new robotics.

3. The net benefit of the proposed new robotics.  

Problem 2: What should Ken recommend that the company? do? Why?

Problem 3: What factors besides the costs and benefits should be considered before the final decision is? made?

Reference no: EM132864759

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