Reference no: EM13487351
MedCo is a large manufacturing company, currently using a large printing press in its operations and is considering two replacements: the PDX341 and PDW581. The PDX341 costs £500,000 and has annual maintenance costs of £10,000 for the first five years and £15,000 for the next five years. After 10 years, the PDX341 will be scrapped (salvage value is zero). In contrast, the PDW581 can be acquired for £50,000 and requires maintenance of £30,000 a year for its 10-year life. The salvage value of the PDW581 is expected to be zero in 10 years.
Complete the following:
Assuming that MedCo must replace their current printing press (it has stopped functioning), has a 10% cost of capital and all cash flows are after tax, which replacement press is the more appropriate as calculated by using the NPV approach?
Item Hand-in Assignment Question
ABC Wines Company is considering the acquisition of a new irrigation system for its extensive vineyards. The system could either be bought outright for £10 million or via a finance lease requiring three annual payments in advance of £3.7 million. The leasing company is not the supplier or manufacturer of the equipment.
The new system is expected to give the following pre-tax net cash savings over the existing system in use:
Year Pre-tax net cash savings
1 £6 million
2 £5 million
3 £3 million
The system would require replacement in three years' time and have no residual value. The outright purchase would be financed by a loan with an interest rate of 8%.
Assume that corporation tax is charged at 25% and is payable one year in arrears. Writing down allowances is available on the depreciation of the equipment. The company uses the reducing balance method for depreciation at 25%. Lease payments are allowable for tax in full.
The company has no gearing at present and a cost of capital of 13%.
Complete the following:
Evaluate whether ABC Wines should go ahead with the installation of the new irrigation system and whether they should use the purchase or the lease option.
Explain the primary ways in which finance leases differ from operating leases.
|
Evaluate the pressure of the sample of gas trapped
: Calculate the pressure of the sample of gas trapped in the open-tube mercury manometer, if the atmospheric pressure is 746 mmHg and h=8.9 cm
|
|
For developing effective proposals
: The Discussion Board: Search the library, or use your favorite search engine for the termproject managementadding other key words to this search such asproject management objectives, project management life cycle, project management work breakdown st..
|
|
Is there something that should be in place with audit firm
: What is the issue in this situation and what sections of the Act are bought into question? Is there something that should be in place with the audit firm?
|
|
Describe the subsequent motion
: Consider two blocks A and B, of mass mA and mB, coupled by a spring and resting on a horizontal frinctionless table. Describe the subsequent motion
|
|
Installation of the new irrigation system
: Evaluate whether ABC Wines should go ahead with the installation of the new irrigation system and whether they should use the purchase or the lease option and explain the primary ways in which finance leases differ from operating leases.
|
|
Explain the calculation of the sodium ion concentration in m
: Calculate the sodium ion concentration when 80.0 mL of 3.2 M sodium carbonate is added to 25.0 mL of 2.3 M sodium bicarbonate. Calculate the sodium ion concentration in M
|
|
Determine the mass of each star
: In outer space, there are two planets that are separated by a distance of 345x10^8 km. These two planets have the extact same mass. What is the mass of each star when it takes 8.9 earth years to complete one orbit
|
|
Explain the difference between an ordinary annuity
: Explain the difference between an ordinary annuity and an annuity due.
|
|
Define the difference in boiling points
: Diethyl ether has a boiling point of 345 degree C and 1 butanol has a boiling point of 117 degree C. Both of these compounds have the same number and types of atom. Explain the difference in their boiling points
|