Page 1 of 1

Square Manufacturing is considering investing in a robotics manufacturing line. Installation of the line will cost an es

Posted: Thu May 19, 2022 1:53 pm
by answerhappygod
Square Manufacturing Is Considering Investing In A Robotics Manufacturing Line Installation Of The Line Will Cost An Es 1
Square Manufacturing Is Considering Investing In A Robotics Manufacturing Line Installation Of The Line Will Cost An Es 1 (227.97 KiB) Viewed 48 times
Square Manufacturing is considering investing in a robotics manufacturing line. Installation of the line will cost an estimated $11.0 million. This amount must be paid immediately even though construction will take three years to complete (years 0, 1, and 2). 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 $8.0 million per year in each of years 4 through 7. 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 $5.3 million per year for each of years 4 through 7. However, it is entirely possible that the savings could be as low as $3.8 million per year for each of years 4 through 7. The company uses a 14 percent discount rate. Use Exhibit A.8. 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.) Best Case Expected Worst Case Net present value