Lifetech. a company from the pharmaceutical industry has asked a project team of the production department to examine whether it is desirable to replace an older packing machine by a more modern and computer-controlled one or not The old machine will still function for a period of 10 years, and this on a technically and economically responsible way. On this machine, there are no more depreciations. The amount for the wages of the packers is now 250.000 per year Lifetech expects an increase of the wages of 5% per year. The expected repairing cost is estimated to be 125.000 per year, with an expected increase of 3% per year. The maintenance cost is also estimated to be 125.000, with an increase of 4% per year On a packing fair, a company presents a computer-controlled machine to Lifetech. This machine could take over the work of the old machine and would require an investment of 1.500.000, including installation. This machine has a useful lifetime of 10 years. The company writes off by straight-line depreciation. For this machine you need bigger stocks, which require an additional working capital of 10.000, starting from the year of the investment. Of course, this sum is recoverable at the end of the project The amount of the wages of the packers is now only 30.000 per year with an increase of 5% per year. The maintenance cost is estimated to be 50.000 with an increase of 4% per year and the repairing cost is estimated to be 35.000 per year with an increase of 3% per year Calculate whether the replacement of the old machine by the new one is attractive or not? The opportunity cost of capital is 12% and the tax rate equals 39%. Questions I. Make an investment analysis 1. Make the calculations using all 3 methods (PB, NPV, IRR) 2. Put the annual cash flow per year in a chart 3. Describe briefly your decision II. Make a sensitivity analysis 1. For what price of the machine is the investment not any more attractive? (with function goal seek on NPV and IRR- should give the same result) 2. The government thinks about raising the taxes up to 42%. What will be the impact on your choice