A company is considering the replacement of some technologically obsolete machinery with purchase of a new machine for $72000. The older machine can be expected to perform the required operation for another 10 years. The older machine has a salvage value of $9000. The new machine with the lastest in technological advances will perform essentially the same operations as the older machine but will effect cost savings of $17500 per year in labour and materials. The new machine is also estimate to last for 10 year. at which time it could be salvaged for $11500,. To install the new machine will cost $7000. Signs for fields has a tax rate of 30%, and its cost of capital is 15%. For tax purpose the company its capital cost allowance is 20%.

Required:

a. calculate the initial cash flow of the replacement investment

b. calculate the present value of the annual after-tax cost saving(pv of cpt)

c calculate the CCA tax shield for this investment

d, calculate the present value of the terminal non-operating cash flow

e calculate the NPV of this investment and decide whether or not signs for fields machinery Ltd purchase the new machine.

Fill the date set also:

Tax rate

CCA rate

Cost of capital

length of project

initial cost

insstallation costs

salvage value

salvage value of old equipment