Evaluate proposal to modernised equipment using npv method

Assignment Help Financial Management

Reference no: EM133212964

Assignment:

Marisa Brathwaite and Associates is a business operating in Hanson Heights Grenada. The company is considering replacing its current manufacturing equipment with the latest equipment available for the industry. Its current equipment was purchased 5 years ago, for $1,600,000 and recently was upgraded at a cost of $400,000. The current equipment can be used for another eight years after which its salvage value will be zero. Alternatively, the company can dispose of the existing equipment at is current market value of $250,000. The company can purchase modern equipment which is currently being sold for $3,000,000 and would require an additional $200,000 to have it installed. This new equipment will have a useful life of eight years and a salvage value of $500,000.

If the new equipment is purchased management expects costs savings as this new equipment would only require one operator with an annual salary of $150,000 compared to the five operators at $80,000 each required for the original equipment. The new equipment is also more environmentally friendly and will reduce production costs by $200,000 per annum. Maintenance costs will be reduced by 75%, the current maintenance costs of the old equipment is $400,000. The new equipment will be depreciated at $337,500 for the next eight years compared to the old equipment being depreciated at $200,000 for the next three years.

Required:

Evaluate the proposal to modernised the equipment using the NPV method and determine the discounted payback period.

Reference no: EM133212964

Questions Cloud

How can organizational change affect hr : 1) Your organization is undergoing a significant change. Outline the steps you will take to understand, communicate, and implement the change process.

Identify a country and discuss the specific laws the d-6 : The D-6 Company is expanding globally, opening manufacturing plants in six countries. D-6 will need to staff the plants with management, line workers, and knowl

Explain why employee involvement in safety is critical : Explain why employee involvement in safety is critical to program success. Provide at least two examples that help illustrate your response

Develop procurement and supply policy and procedures : Appropriate for the companys strategic requirements Use the External Training Procurement Policy and Procedures Template to guide your work

Evaluate proposal to modernised equipment using npv method : Evaluate the proposal to modernised the equipment using the NPV method and determine the discounted payback period.

Develop compliant assessment and recognition policies : Develop compliant assessment and recognition policies and procedures. Use the internet to research relevant policies and procedures and develop them into

List some primary causes of conflict at work : 1. What are the types of conflict that individuals may have at work? Which type have you experienced the most?

What happens when hash one and hash two do not match : Review the section on The Hash Tree Engine, and respond to the questions below - What happens when Hash 1 and Hash 2 do not match

Secure the industry against crises in the future : Analyse the sources to show how your research will attempt to contribute to existing knowledge - exploration of the travel and tourism recovery progress

User Account

All Pages