Tesla is thinking of spending $12,000,000 to automate a production facility. The investment is expected to...

Tesla is thinking of spending $12,000,000 to automate a production facility. The investment is expected to have the following effects: Automation will increase the capacity of the plant and allow it to boost production and sales by 30 percent. The sales now is $15,000,000 per year, with 15,000 units sold. The company will be able to reduce labor cost per unit by 20 percent. The labor cost per unit now is $30. Factory supervision costs will increase by $500,000 per year. The estimated useful life of the equipment is 5 years, at which point it will have a residual value of $1,000,000. Straight-line depreciation is used.

1. What is the change in net income per year (input 20, if it's an increase for $20)?

2. If the discount rate is 11%, What is the NPV of the automation (please use excel to do NPV calculation, round to 2 decimal places, if -200.893, input -200.89, if 200.893, input 200.89)?

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Expert Solution

ekkarill92 answered 1 year ago

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