Reference no: EM131623774

Unicorn Airlines owns and operates a large workshop in which it services its aircraft. The management of Unicorn has recently investigated the possibility of closing its workshop and instead paying an unrelated company, Plane Repairers Ltd, to undertake the regular servicing of Unicorn's aircraft. As part of this investigation Unicorn has recently had three of its aircraft serviced by Plane Repairers to test the quality and timeliness of the service offered by Plane Repairers. Unicorn's accountant has estimated that Plane Repairers delivered the service at a cost that was about $20 000 less than it would have cost Unicorn to undertake the servicing in its own workshop. If the workshop is closed, Unicorn intends to remove and sell the machinery currently in the workshop and use the space as a storage area. At present Unicorn is very short of storage space and is currently leasing storage space from Big Box Enterprises Ltd. If the workshop is closed there will be approximately 50 staff redundancies and Unicorn has an enterprise agreement that requires Unicorn to pay all workers who are made redundant a sum equal to the wages they would otherwise have been paid in the coming year. Unicorn is an Australian tax- paying company. You have been asked to complete the investigation, using the net present value method of investment evaluation. For each of the following, state whetherthe item would be needed for your analysis and give brief reasons for each answer.

(a) Next year's depreciation charge on the machinery currently in the workshop.

(b) The written-down value of the machinery.

(c) The amount payable in staff redundancy payments. (d) The $20 000 savings made by having had the three aircraft serviced by Plane
Repairers.