Assume that Monsanto Corporation is considering the replacement of some ofits older and outdated carpet-manu facturing equipment. Its objective is to improve the efficiency of operations in terms of...

Extracted text: Assume that Monsanto Corporation is considering the replacement of some ofits older and outdated carpet-manu facturing equipment. Its objective is to improve the efficiency of operations in terms of both speed and reduction in the number of defects. The company's finance department has compiled pertinent data to conduct a marginal cost-benefit analysis for the proposed equipment replacement. The cash outlay for new equipment would be approximately $600,000. The net book value of the old equipment and its potential net selling price add up to $250,000. The total benefits over the life of the new equipment (measured in today's dollars) would be $900,000. The sum of benefits from the remaining life of the old equipment (measured in today's dollars) would be $300,000. To Do Create a spreadsheet to conduct a marginal cost-benefit analysis for Monsanto Corporation, and determine the following: a. The marginal benefits of the proposed new equipment. b. The marg inal costs of the proposed new equipment. The net benefit of the proposed new equipment. d. What would you recommend the firm do? Why? с. Solution 2 3 a. The marg inal benefits of the proposed new equipment. 4 Benefits with the new equipment Less: Benefits with the old equipment $ 900,000 $300,000 6 L7 Marginal (added) benefits of the New Equipment b. The marginal costs of the proposed new equipment. Cost of new equipment Less: Proceeds from the sale of the old equipment Marginal (added) costs of the New Equipment $ 600,000 $ 250,000 1 2 3 4 с. The net benefit of the proposed new equipment. L7 Net benefit 8 d. What would you recommend the firm do? Why? 1 Should Monsanto Corporation replace the old equipment with the new equipment? 2 Why? Because the marginal benefits of $600,000 are 3 4 5 |than the marginal costs of $350,000. 6 7 Requirements 1 In cell H17, by using cell references, calculate the marg inal (added) benefits of the new equipment. 2 In cell H23, by using cell references, calculate the marginal (added) costs of the new equipment. 3 In cell G27, by using cell references, calculate the net benefit. 4 In cell 131, type either Yes or No depending on whether you think Monsanto Corporation should or should not replace the old equipment with the new equipment, respectively. -9 -0 -1 5 In cell F34, type either larger or smaller depending on whether you think the marginal benefits are larger or smaller than the marginal costs, respectively. -2 3