Question
IBX Pty Ltd is considering the purchase of a new machine that is expected to save the company $84,000 at the end of each year
IBX Pty Ltd is considering the purchase of a new machine that is expected to save the company $84,000 at the end of each year in reduced wages.
The machine costs $288,000, plus another $16,000 to be installed. It is expected to last for five years after which it can be sold as scrap for $49,000. Operating expenses (such as fuel and maintenance) are $8,000 pa.
a)Determine the annual net cash flows of this investment (ignore the effect of taxes). Enter the information in the following table. Indicate whether cash flows are + or -:
| Time | 0 | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|---|
| Net Cash Flow |
b)Calculate the NPV if the required rate of return is 11% pa. Give your answer in dollars and cents to the nearest cent.
NPV11% = $
c)Calculate the NPV if the required rate of return is 13% pa. Give your answer in dollars and cents to the nearest cent.
NPV13% = $
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Finance And Strategy Inside China
Authors: Check-Teck Foo
1st Edition
9811328404,9811328412
