CourseLover

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About CourseLover

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Teaching Since: May 2017
Last Sign in: 283 Weeks Ago
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Education

  • MCS,MBA(IT), Pursuing PHD
    Devry University
    Sep-2004 - Aug-2010

Experience

  • Assistant Financial Analyst
    NatSteel Holdings Pte Ltd
    Aug-2007 - Jul-2017

Category > Business & Finance Posted 10 Dec 2017 My Price 10.00

basis of the Net Present Value

XYZ Ltd. provides you the following information :

1.Purchase Price of New Machinery$1,000,000

2.Installation Expenses $150,000

3.Workers' Training Expenses incurred to put the asset to use $ 50,000

4.Subsidy from Govt. 60% of Purchase price

5.Working Capital $ 300,000

6.Useful Life of the machine 5 years

7.Book Salvage Value 10 % of purchase price

8.Cash Salvage Value $ 120,000

9.Method of Depreciation Straight line

10.Tax Rate 30%

11.Cost of Capital 10%

12.Sales Units: 1st yr 100,000 units, 2nd yr 200,000 units, 3rd yr 300,000 units, 4th yr 400,000 units, 5th yr 500,000 units.

13.Initial selling price per unit of $ 10 will continue for first 2 years and $ 9 thereafter. Variable cost is 40% of initial selling price. Annual fixed cost other than depreciation is $ 200,000 which will increase to $ 3,00,000 after 3rd year.

Required : Advise the company whether the machinery should be purchased or not on the basis of the Net Present Value

Answers

CourseLover
(12)
Status NEW Posted 10 Dec 2017 02:12 PM My Price 10.00

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