Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 2

An automobile-manufacturing company is considering purchasing an industrial robot to do spot welding, which is currently done by skilled labor. The initial cost of the robot is $210,000, and the annual labor savings arc projected to be $150,000 If purchased, the robot will be depreciated under MACRS as a five-year recovery property. The robot will be used for seven years, at the end of which time, the firm expects to sell it for $60,000. The company's marginal tax rate is 35% over the project period. Determine the net after-tax cash flows for each period over the project life. Assume MARR = 15%.