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The Hub Store at a university in eastern Canada is considering purchasing a self-serve checkout machine similar to those used in many grocery stores and other retail outlets. Currently the university pays part-time wages to students totalling $55,500 per year. A self-serve checkout machine would reduce part-time student wages by $35,500 per year. The machine would cost $250,000 and has a 10-year useful life. Total costs of operating the checkout machine would be $5,100 per year, including maintenance. Major maintenance would be needed on the machine in five years at a total cost of $10,100. The salvage value of the checkout machine in 10 years would be $40,500.

The CCA rate is 25%. Management requires a 9% after-tax return on all equipment purchases. The company’s tax rate is 30%.

**Required:**

**1.*** *Determine the before-tax net annual cost savings that the new checkout machine will provide.

**2-a. **Using the data from (1) above and other data from the exercise, compute the checkout machine’s net present value. (*Hint*: Use Microsoft Excel to calculate the discount factor(s).) **(Do not round intermediate calculations and round your final answer to the nearest dollar amount. Negative value should be indicated with minus sign.)**

**2-b. **Would you recommend that the machine be purchased?

Answer with Step by Step calculation would be appreciated.

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