Part 1:

part 2:

You must clearly show yearly Cash Flows, Payback Period, NPV and IRR computed and suggest the decisions.

7,00,000 80,000 20,000 E HY HY Cost of New Machine Shipping Cost Installation Charges Additional Working Capital Current Salvage value of old machine Annual Dep. of old machine Purchase Price of Old machine (6 years ago) Unexpired life of old machine Life of new machine Decrease in operating costs due to new mach Scrape value of new machine after 4 years Rate of WDV Dep. Marginal Rate of Tax Hurdle Rate 1,20,000 20,000 2,00,000 4 years 4 years 90,000 50,000 30% 40% 10% Compute: 1) Net Incremental Cash Flows for the project 2) Compute Payback Period, NPV and IRR of the project E 1,00,000 7,00,000 50,000 75,000 5 years Net increase in working capital Reduction in annual operating costs Savings in annual maintenance costs Annual technical support expenditure Life of machine Rate of Dep based on WDV Salvage value of machine Effective Tax Rate Scrap value of existing facility Hurdle Rate E 40% 5,00,000 35% 6,00,000 10% HY Compute: 1) Net Incremental Cash Flows for the project 2) Compute Payback period, NPV and IRR of the project