capital budgeting

| December 2, 2015

A manufacturing company wants to decrease its labor costs by substituting skilled welders with robot welding machines. If the company marginal tax rate is 36% is the investment a good idea? Assumed 2,000 working hours in a year.

MACHINE COST: $268,279

MACHINE INSTALATION COST: $18,727

DEPRECIATION: 7 year MARCS, half year conversion

SALVAGE VALUE @ YEAR 5: $50,973

COMPANY MARR: 19%

WELDER SALARY: $56/hr, benefits 34%
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