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A computerized machining center has been proposed for a small too-manufacturing company. If the new system, which costs $150,000, is installed, it will generate annual
A computerized machining center has been proposed for a small too-manufacturing company. If the new system, which costs $150,000, is installed, it will generate annual revenue of $105,000 and will require $20,000 in annual labor, $15,000 in annual material expenses, and another $10,000 in annual overhead expenses. The automation facility would be classified a Class 43 property with a CCA rate of 30%. The life span of the project is 5 years with a salvage value of $45,000. The tax rate is 40% and the MARR is 12%. All the information above is in constant dollars in term t=0. Suppose that we expected the general rate of inflation is 4%; the rate of inflation of equipment is 3%; the inflation rate of wages is 5%; the inflation rate of overhead and materials is 6%; the inflation rate of revenue is 4%. (a) Create the cash flow table for the project and find the NPW of the project when there no inflation. (30 marks) (b) Create the cash flow table and find the NPW of the project when there is inflation (described above). (40 marks) (c) Suppose the debt to equity ration is 50%. Redo (b). (30 marks) A computerized machining center has been proposed for a small too-manufacturing company. If the new system, which costs $150,000, is installed, it will generate annual revenue of $105,000 and will require $20,000 in annual labor, $15,000 in annual material expenses, and another $10,000 in annual overhead expenses. The automation facility would be classified a Class 43 property with a CCA rate of 30%. The life span of the project is 5 years with a salvage value of $45,000. The tax rate is 40% and the MARR is 12%. All the information above is in constant dollars in term t=0. Suppose that we expected the general rate of inflation is 4%; the rate of inflation of equipment is 3%; the inflation rate of wages is 5%; the inflation rate of overhead and materials is 6%; the inflation rate of revenue is 4%. (a) Create the cash flow table for the project and find the NPW of the project when there no inflation. (30 marks) (b) Create the cash flow table and find the NPW of the project when there is inflation (described above). (40 marks) (c) Suppose the debt to equity ration is 50%. Redo (b). (30 marks)
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