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Do answer question (a) only . 6 . . Dubai Foods plc is considering computerising its food processing production line. Dubai Foods plc is considering
Do answer question (a) only .
6 . . Dubai Foods plc is considering computerising its food processing production line. Dubai Foods plc is considering a proposal put forward by Akme Robotics pic who have stated that the cost of the computerised equipment will be 135 000 The following information is available. The computerised equipment will give labour savings of 54 000 per year. The computerised equipment will have a life of 5 years, after which it will be sold for scrap for 5 000 Depreciation using the straight-line method will be applied. There will be extra costs each year, including depreciation. albooo In year 1, the extra costs including depreciation will be 42 000 per year. In year 2 and year 3, the extra costs excluding depreciation will be 5% higher each year than year 1. In year 4 and year 5, the extra costs excluding depreciation will be 5% higher each year than year 2 and year 3. Dubai Foods ple's cost of capital will be 8%. A table showing the discount factors for 8% is given below. 00 Year 8% I 42000 1 0.926 2 bove 2 0.857 3 0.794 [ 16 ore 4 0.735 5 0.681 Required (a) Calculate the net present value of the project at the end of year 5. (15)Step by Step Solution
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