Problem A-18 (Algo) Sensitivity Analysis in Capital Investment Decisions Square Manufacturing is considering investing i

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Problem A 18 Algo Sensitivity Analysis In Capital Investment Decisions Square Manufacturing Is Considering Investing I 1 (30.89 KiB) Viewed 67 times

Problem A-18 (Algo) Sensitivity Analysis in Capital Investment Decisions Square Manufacturing is considering investing in a robotics manufacturing line. Installation of the line will cost an estimated $97 million. This amount must be paid immediately even though construction will take three years to complete tyears 0 and 21 Year 3 will be spent testing the production line and hence, it will not yield any positive cash flows. If the operation is very successful, the company can expect after-tax cash savings of $6.7 million per year in each of years 4 through 2 After reviewing the use of these systems with the management of other companies, Square's controller has concluded that the operation will most probably result In annual savings of $4.9 million per year for each of years 4 through 7. However, it is entirely possible that the savings could be as low as $2.5 million per year for each of years 4 through 7. The company uses a 16 percent discount rate. Use Exhibit Required: Compute the NPV under the three scenarios (Round PV factor to 3 decimal places. Enter your answers in thousands of dollars. Negative amounts should be indicated by a minus sign) Worst Case Nel presente