D Instrument Company(DIC) is considering purchase of a new robotic machine, the RoboNX model. According to specifications and results testing, RoboNX will significantly increase productivity compared AccuYY model, the engine being used by DIC.AccuYY, acquired 8 years ago with a purchase price of RM120.000 and depreciate it over 10 years of useful life with a residual value of RM20,000. The Engineering Department expects the AccuYY to be in use for another three years after a major overhaul is made at the end of the expected useful life. Good cost budget recovered is RM100,000 Machines that have been repaired will be depreciated using the straight line method with no residual values. This overhaul will improve the operating efficiency of the machine is about 20%. No more operating conditions affected by this overhaul RoboNX is sold for RM250.000. Installation, testing and this machine training requires another additional cost of RM30.000. Manufacturer willing to trade in AccuYY for RM40.000. RoboNX will be depreciated with the straight line method without residual values. The emergence of new technologies will causing the obsolescence of RoboNX to the firm within five years. The variable operating cost for both machines is the same at RM10 per hour. Other information is as follows: RoboNX 10,000 4,000 $100 $40 AccuYY Output units (per year) 10,000 Machine per Hour 8,000 Selling price per unit $100 Production cost are variable $40 (exclude machine/hour) Other annual expenses(equipment $95,000 & supervision) Disposal value-present $25,000 Disposal value-in five year 0 $55,000 $50,000 The weighted average cost of capital of DIC is 12% and company tax is 40%. Be required: 1) Determine the net cash flow for both alternatives; overhaul AccuYY and purchase of RoboNX D Instrument Company(DIC) is considering purchase of a new robotic machine, the RoboNX model. According to specifications and results testing, RoboNX will significantly increase productivity compared AccuYY model, the engine being used by DIC.AccuYY, acquired 8 years ago with a purchase price of RM120.000 and depreciate it over 10 years of useful life with a residual value of RM20,000. The Engineering Department expects the AccuYY to be in use for another three years after a major overhaul is made at the end of the expected useful life. Good cost budget recovered is RM100,000 Machines that have been repaired will be depreciated using the straight line method with no residual values. This overhaul will improve the operating efficiency of the machine is about 20%. No more operating conditions affected by this overhaul RoboNX is sold for RM250.000. Installation, testing and this machine training requires another additional cost of RM30.000. Manufacturer willing to trade in AccuYY for RM40.000. RoboNX will be depreciated with the straight line method without residual values. The emergence of new technologies will causing the obsolescence of RoboNX to the firm within five years. The variable operating cost for both machines is the same at RM10 per hour. Other information is as follows: RoboNX 10,000 4,000 $100 $40 AccuYY Output units (per year) 10,000 Machine per Hour 8,000 Selling price per unit $100 Production cost are variable $40 (exclude machine/hour) Other annual expenses(equipment $95,000 & supervision) Disposal value-present $25,000 Disposal value-in five year 0 $55,000 $50,000 The weighted average cost of capital of DIC is 12% and company tax is 40%. Be required: 1) Determine the net cash flow for both alternatives; overhaul AccuYY and purchase of RoboNX
