Question
Can someone help me out this problem? You are trying to decide whether or not to put in some new capital equipment. Your line is
Can someone help me out this problem?
You are trying to decide whether or not to put in some new capital equipment.
Your line is currently operating at full standard capacity so sales are currently maxed out
You are putting in new equipment which will make the line more efficient and last for 10 years (depreciate equally over 10 years)
The equipment will increase the capacity of the line by 30%,or $300,000 in additional sales.
and will eliminate 3 positions of manual labor when fully operational the second year
Sales from this line generate 50cents profit for each dollar of sales.
The project will allow sales to increase by 100,000 in year 1 and in year 2 by 200,000and 300,000 for the other years over the current maxed out base. A manual position of labor costs $30,000 per year with benefits.
The equipment will costs $600,000
engineering and installation will cost $100,000
The company uses a hurdle rate of 18% for projects of this risk type.
Year
CASH FLOW CALCULATIONS 0 1 2 3 4 5 6 7 8 9 10
Incremental sales growth 0
0 Profit from incremental sales 0
savings from eliminating manual positions 0
Depreciation 0
Increase in income before taxes 0 0 0 0 0 0 0 0 0 0 0
Estimated taxes at 35% 0 0 0 0 0 0 0 0 0 0 0
Increase in income after taxes 0 0 0 0 0 0 0 0 0 0 0
Net cash = Income after tax + Dep 0 0 0 0 0 0 0 0 0 0 0
cost of equipment
cost of installation
NET CASH FLOW00000000000
Payback-------
IRR#NUM!
NPV$0.00
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