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

Budgetary styles, their definitions and the advantages and disadvantages

their definitions and the advantages and disadvantages

Break-even dollars amount, Selling product for 31.00 and Variable expenses ...

Selling product for 31.00 and Variable expenses are 26.00. In order to cover the fixed expenses 31,500 hats must be sold what is the Total fixed cost in dollars?

Managerial decision, Explain the practical application of differential cost...

Explain the practical application of differential costing with examples

Investing surplus cash, The requirement for working capital fluctuates acco...

The requirement for working capital fluctuates according the level of inventory, production, debtors and creditors etc. The working capital needs are not uniform during the year be

Homework, costs/per unit labor ... $ 4 materials ...5 fixed cost... $ 12 ...

costs/per unit labor ... $ 4 materials ...5 fixed cost... $ 12 determine the break even point in units if the seeling price is $ 19 determine the break even point in sales at

Monitoring receivables, A firm requires continuously monitoring and control...

A firm requires continuously monitoring and controlling its receivables to make sure that the dues are paid on the due date and no dues stay outstanding for a long period of time.

Cost behavior-cost drivers , Cost Behavior A firm's cost position res...

Cost Behavior A firm's cost position results from the cost behavior of its value activities. The cost behavior is based on a number of structural factors which influence cost

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