Capital budgeting, Managerial Accounting

Assignment Help:
A firm wants to buy a new machine and the following quotation has been received.

Cost of machine US$100 000
Freight and insurance US$5 000

The new machine will last for five years and has a salvage value of Z$80 000. If the new machine is bought the firm will dismantle an old machine at a cost of Z$20 000. The old machine for which 100% SIA has been claimed can be sold today for Z$50 000. The old machine can still last for five more years and will result in a cost of Z$100 000 per annum.

The new machine will result in the firm incurring costs of Z$150 000 per annum. Current production is 100 000 units per annum which will increase to 120 000 units with the new machine. The firm will be able to charge an extra Z$5 per unit over the above current price of Z$15 per unit.

Cost capital is 24%

Tax rate is 40%

Exchange rate: US$1= Z$13

Required:

a) Estimate the initial investment
b) Annual cash flows
c) Terminal value
d) Calculate: the NPV, IRR, PI, PBP

Related Discussions:- Capital budgeting

Choosing relationship predicts best variable-cost estimating, Choose the re...

Choose the relationship which best predicts the dependent variable After exploring a diversity of relationships, you should select the one that can best be employed in predicti

What is replacement cost, Replacement cost It is the cost of replacing ...

Replacement cost It is the cost of replacing a material or asset, by purchase from the current market. If an X material was originally purchased @ Rs. 250 per Kg. And know i

Make and b, The Rohr Company’s old equipment for making subassemblies is wo...

The Rohr Company’s old equipment for making subassemblies is worn out. The company is considering two courses of action: (a) Completely replacing the old equipment with new equipme

Assigment, taking the role of a consultant, discuss the factors you would c...

taking the role of a consultant, discuss the factors you would consider in selecting a suitable accounting system solutio for a small to medium enterprise. i has to be 1200 q\work

Inventory planning and control, INVENTORY PLANNING AND CONTROL The main...

INVENTORY PLANNING AND CONTROL The main goal of "inventory control" is to discover and maintain the optimum level of investment in all types of inventories, from raw materials

Marginal returns and negative marginal returns, 1) What is the difference b...

1) What is the difference between decreasing marginal returns and negative marginal returns?   2.) "A firm in monopolistic competition maximizes its profit by producing where it

Ira, Your financial advisor has recommended that you invest into your Roth ...

Your financial advisor has recommended that you invest into your Roth Individual Retirement Account (Roth IRA) the sum of $5,000. If you put in $5,000 today, what will this investm

Help, Jackson County Senior Services is a nonprofit organization devoted to...

Jackson County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Jackson County area. Three serv

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd