Question 9.18 – Come with the table as written. firm wants 12% IRR after taxes, how much can it afford to pay for this machine? a secretary, but who cannot afford one. The de- vice. called Tele-Receptionist, is similar to a voicemail system. It uses digital recording technology to create the illusion that a person is operating the switchboard at a busy office, The company purchased a 40.000 ft- building 9.18 The Manufacturing Division of Ohio Vending Machine Company is considering its Toledo plant's request for a half-inch-capacity automatic es Zhang (no subject) Problems 343 screw-cutting machine to be included in the divi- sion's 2001 capital budget: Anticipated savings: As shown in the fol- lowing table. Tax depreciation method: seven-year MACRS. Marginal tax rate: 40%. MARR: 15%. Name of project: Mazda Automatic Screw Machine Project cost: $68,701 Purpose of project: To reduce the cost of some of the parts that are now being sub- contracted by this plant, to cut down on in- ventory by shortening lead time, and to better control the quality of the parts. The proposed equipment includes the following cost basis: (a) Determine the net after-tax cash flows over the project life of six years. Assume a sal- vage value of $3,500. (b) Is this project acceptable, based on the PW criterion? (c) Determine the IRR for this investment, Machine cost Accessory cost Tooling Freight Installation Sales tax Total cost $48.635 $8.766 $4.321 $2.313 $2.110 $2,556 $68,701 9.19 American Aluminum Company is consider- ing making a major investment of $150 mil- lion (S5 million for land, $45 million for buildings, and $100 million for manufacturing equipment and facilities) to develop a stronger, lighter material, called aluminum lithium, that will make aircraft sturdier and more fuel efficient. Aluminum lithium, which has been sold commercially for only a few Item Hours Present M/C labor Proposed M/C labor Present Method Proposed Method 350 hrs 800 hrs $7.700 $17.600 2.410 hrs Setup Run Overhead Indirect labor Fringe benefits Maintenance Tooling Repair Supplies Power Taxes and insurance Other relevant costs Floor space Subcontracting Material Other Total Operating advantage $3,500 $8.855 $1.350 $6,320 $890 $4,840 $795 $763 $3.210 $122.468 $27,655 $210 $83.688 $38.780 $122.468

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