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in case the new machinery may have a remaining market value of 50.000, the answer with the VPN technique evaluation technique will be the same?
in case the new machinery may have a remaining market value of 50.000, the answer with the VPN technique evaluation technique will be the same? VPN at 16% discount rate
The company United Metal Transport Co. (UMT) is considering to replace its old machinery which is used to the production of metallic transport units. The new machinery is expected to improve the durability of the metal components. A marketing study suggested that the improved durability of the metal components will allow the sale of each unit at an increased price by 0.30 than the units produced by the old machinery (the current price is 7.50 per unit). Sales are expected to increase from 160,000 to 176,000 units per year. The new machinery will cost 280,000 and will have 17.000 annual operating expenses. Raw materials, selling, general and administrative expenses will continue at 7 per The new machinery will have as a result an increase of working capital by 40,000 in year 0 which will be retrieved in the end of the useful life of the project. The new machinery will have a useful life of 7 years. It will be depreciated for tax purposes with the straight-line depreciation method (meaning the same amount is expensed in each period over the asset's useful life with the assumption that there is no residual/salvage value. The tax rate is 34% and the discount rate (cost of capital) is 16%. Using this information, you are required to: unit. The company United Metal Transport Co. (UMT) is considering to replace its old machinery which is used to the production of metallic transport units. The new machinery is expected to improve the durability of the metal components. A marketing study suggested that the improved durability of the metal components will allow the sale of each unit at an increased price by 0.30 than the units produced by the old machinery (the current price is 7.50 per unit). Sales are expected to increase from 160,000 to 176,000 units per year. The new machinery will cost 280,000 and will have 17.000 annual operating expenses. Raw materials, selling, general and administrative expenses will continue at 7 per The new machinery will have as a result an increase of working capital by 40,000 in year 0 which will be retrieved in the end of the useful life of the project. The new machinery will have a useful life of 7 years. It will be depreciated for tax purposes with the straight-line depreciation method (meaning the same amount is expensed in each period over the asset's useful life with the assumption that there is no residual/salvage value. The tax rate is 34% and the discount rate (cost of capital) is 16%. Using this information, you are required to: unitStep by Step Solution
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