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MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
DL Services is in the business of providing home services like plumbing,sewerage line cleaning etc. There is a proposal before the company topurchase mechanized sewerage cleaning line for a sum of Rs. 20 lacs. Thelife of the machine is 10 years. The present system of the company is to usemanual labour for the job. You are provided the following information :
Cost of machine Rs. 20 lacsDepreciation 20% p.a. straight lineOperating cost Rs. 5 lacs per annumPresent systemManual labour 200 personsCost of Manual labour Rs. 10,000 (ten thousand) per person per annum
The company has an after tax cost of funds of 10% per annum. The applicable rate ,of tax inclusive of surcharge and cess is 35%.
Based on the above you are required to:(i) State whether it is advisable to purchase the machine.(ii) Compute the savings/additional cost as applicable, if the machine is purchased.
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