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19 marks] The Canadian company Encircled Ltd makes thoughtfully designed, versatile capsule wardrobe thoughtfully chosen to meet the company's high standards in wearability and sustainability.
19 marks] The Canadian company Encircled Ltd makes thoughtfully designed, versatile capsule wardrobe thoughtfully chosen to meet the company's high standards in wearability and sustainability. Currently the company to its products manually. To improve the production process, the management decided to buy a new tagging in the costs 535,000 and would last for 10 years. At the end of the useful life, the machine could be sold for 51.750. In addition at the end the seventh year, the machine would require an overhaul for $10,750, Encircled estimates that the annual operating costs of the machine is $8,450. The current manual method of attaching tags cos per year. The purchase of the machine, however, would help the company increases its capacity by 8.300 units. The associated und contribution margin is $3.40. Encircled requires 12% return on all investment in equipment and machinery Instructions (a) What net annual cash inflows will be provided by the new tagging machine? (2 marks) (b) Compute the new machine's net present value. Use the incremental cost approach, and round all dollar amounts to the nearest whole dollar. Clearly state the PV factor(s) used. (6 marks) (C) Should Encircled purchase the new tagging machine? Why or why not? (1 marks)
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