Question
A capital investment is going to be made in a company, for which it is necessary to spend the amount of $175,000 in equipment, with
A capital investment is going to be made in a company, for which it is necessary to spend the amount of $175,000 in equipment, with a salvage value of $17,000 at the end of its useful life of 8 years. It is estimated that said project will produce additional income before depreciation and taxes of $45,500 per year and operating costs of $18,500, increasing by $580 annually. The company manager analyzes the possibility of requesting a loan of $75,000 to be able to acquire the machinery (the rest would be provided by the company). The interest on the loan is 17% per year and would be settled in 7 equal annuities, each end of the year. If the company has a MARR of 25%, it pays taxes at a rate of 40%, it depreciates the equipment on a straight line basis and if it additionally decides to sell it at the end of its useful life, will it be convenient for the company to request a loan from the bank to make the capital investment in the equipment? Calculate: a) Amortization table of the bank loan b) Depreciation table of the equipment and its book value annually. c) Flow of funds. d) NPV and CAUE after taxes e) Return on investment. f) Briefly make a conclusion based on the data obtained.
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