Question
AAAA is a company that makes upmarket timber-based products in country B. It is considering replacing 5 employees with a new machine that costs $350,000.
AAAA is a company that makes upmarket timber-based products in country B. It is considering replacing 5 employees with a new machine that costs $350,000. The machine will be depreciated using the prime cost method over five years and have a terminal book value of $5,000. The market value of the machine will be $50,000 in five years. Each of those employees is currently paid an annual salary of $20,000. If bought, the machine will immediately reduce the company's net working capital by $35,000, but this amount of net working capital will have to be fully replaced once the machine is sold. The company's cost of capital is 15%. AAAA is subject to a corporate tax rate of 35%.
Answer the following questions:
1. Calculate NOPAT (Net Operating Profit After Tax).
2.Calculate NCF (Net Cash Flows).
3.Calculate NPV (Net Present Value).
4.Should AAAA buy the machine?
Shows the accounting flows table and cash flows table !!!!!!!!!
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