Year 1 Year 2 Year 3 Year 4 Year 5

Units sold 1600 3200 6400 12800 25600

Price per unit 1800 1530 1300.5 1105.425 939.6113
Total Revenue 2880000 4896000 8323200 14149440 24054048

Fixed Cost 1000000 1000000 1000000 1000000 1000000

Variable
manufacturing cost
per unit 1000 940 883.6 830.584 780.749

Total Variable costs 1600000 3008000 5655040 10631475 19987173

Marketing expense 403200 685440 1165248 1980922 3367567

Total Expenses 3003200 4693440 7820288 13612397 24354740

Profit Before Tax -123200 202560 502912 537043.2 -300692

Comparison of costs with and without automation

Year 1 2 3 4 5
Fixed costs with
automation 2000000 2000000 2000000 2000000 2000000

Variable costs with

automation per unit 800 752 706.88 664.4672 624.5992
Total variable cost
with automation 1280000 2406400 4524032 8505180 15989739

Total Costs with

automation 3280000 4406400 6524032 10505180 17989739
Total costs without
automation 2600000 4008000 6655040 11631475 20987173

Gain due to
automation -680000 -398400 131008 1126295 2997435
FINAL ANSWER
After buying the new automated machine
Year 1 Year 2 Year 3 Year 4 Year 5
Units sold 1600 3200 6400 12800 25600
Price per unit 1800 1530 1300.5 1105.425 939.6113
Total Revenue 2880000 4896000 8323200 14149440 24054048

Fixed Cost(without
automation) 1000000 1000000 1000000 1000000 1000000

Fixed Cost(with automation) 2000000 2000000 2000000 2000000 2000000

Variable manufacturing cost

per unit(without automation 1000 940 883.6 830.584 780.749

Variable manufacturing cost

per unit(with automation) 800 752 706.88 664.4672 624.5992
Total manufacturing costs 2600000 4008000 6524032 10505180 17989739
Automation ? No No Yes Yes Yes

Marketing expense 403200 685440 1165248 1980922 3367567

Total Expenses 3003200 4693440 7689280 12486102 21357305

Profit Before Tax -123200 202560 633920 1663338 2696743

NPV 2,754,623.43