Evaluate net present value of machine, Financial Management

Kenneth Su Gold Corp (KSGC) is considering the purchase of a new piece of machinery. The new machinery would cost $80,000. You are given the following facts:

  • The new machine will replace an existing machine that has a current market value of $30,000.
  • The new machine would reduce before tax operating costs by $15,000 per year for 10 years. These cost savings would occur at year-end.
  • The old machine is now 5 years old. It is expected to last for another 10 years, and will have no resale value at the end of those 10 years. It was purchased for $60,000 and is being depreciated at a CCA rate of 20%.
  • The new machine will also be depreciated at a CCA rate of 20%. KSGC expects to be able to sell the machine for $10,000 at the end of 10 years. At that time KSGC plans to reinvest in a new machine in the same CCA pool.
  • The new machine requires a one-time increase in net working capital of $5,000. This amount is required at  the beginning of the project and is fully recovered at the project's end.  
  • The appropriate discount rate is 12% and the tax rate is 40%. What is the NPV associated with replacing the machine?
Posted Date: 2/15/2013 7:35:04 AM | Location : United States

Related Discussions:- Evaluate net present value of machine, Assignment Help, Ask Question on Evaluate net present value of machine, Get Answer, Expert's Help, Evaluate net present value of machine Discussions

Write discussion on Evaluate net present value of machine
Your posts are moderated
Related Questions
I need this in the next 24 hours urgently. If you can accept this, you must be meeting the deadline with strictly no delays or full payment refund is needed

Q. Demerits of profitability index method? Demerits of PI method:- (i) This method is complicated to understand and implement (ii) Calculations in this method are complex

Q. Cost of capital? The terms of cost of capital refers to the minimum rate of the return a firm must earn on its investment so that the market value of the company equity shar

In a fixed-rate coupon bond, the change in the price can be attributed to the change in the market interest rates. This change is due to the difference in the pre

Explain what will happen while the government imposes a minimum price that is below the market equilibrium price. Why is this true? The minimum price will comprise no impact on t

Accounting Entity - Accounting Principle For accounting reasons it is suppose that business has separate existence and its entity is different from that of its owner(s). In si

briefly discuss the three approaches to the short-term financing problems and examples of each

Explain cash flow and funds flow analysis with suitable example from an existing corporate entity for at least three years i.e. 2008, 2009.2010.

The price of the embedded option comprises two components. The first is the value of the same bond assuming it has no embedded option (option-free bond), th

Discuss any advantages you can think of for a company to (1) cross-list its equity shares on much more than one national exchange, (2) To source new equity capital fro