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15.04.2020 • 
Business

"I'm not sure we should lay out $250,000 for that automated welding machine," said Jim Alder, president of the Superior Equipment Company. "That's a lot of money, and it would cost us $80,000 for software and installation, and another $3,000 every month just to maintain the thing. In addition, the manufacturer admits that it would cost $45,000 more at the end of three years to replace worn-out parts. "I admit it's a lot of money," said Franci Rogers, the controller. "But you know the tumover problem we've had with the welding crew. This machine would replace six welders at a cost savings of $108,000 per year And we would save another $6,500 per year in reduced material waste. When you figure that the automated welder would last for six years, I'm sure the return would be greater than our 16% required rate of retum "T'm still not convinced," countered Mr. Alder. "We can only get $12,000 scrap value out of our old welding equipment if we sell it now, and in six years the new machine will only be worth $20,000 for parts. But have your people work up the figures and we'll talk about them at the executive committee meeting tomorrOw. Click here to view Exhibit 8B-1 and Exhibit 88-2, to determine the appropriate discount facton(s) using tables. Required 1. Compute the annual net cost savings promised by the automated welding machine.

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