please answer 21,22
20. the costi that have accoved in the part cor air non recoverabies) should not be corsideied in making the insestrent decivion. What are mise coits? per yeat. The current market value of the existing symem is 350000 and the marhat volue in 4 A) Francial coats year in expected to be 520000 . B) Opportincy costs A firm is conodering the purchase of a 1700000 "new" computer bined ingertafy manogenere G) Sunk coiss Di Side elthect at the end of that fime. The new ystem alowi a frem to uve s6a000 befoce taen in imeritory 21. According to the below resuls for the senaitivily ansyait on a propect which ane of the able to ary lest total imentary and thut bre up 13000 in NWC (relative to the ewing yytamf? following factors has the highest forecosting fi b? The requied rate on this new chiem is 16% and the tax rale is 21% ifplectrent propocal None OCF= Operating Cash fow = fivt + Deprecubion Dinet Note: Arroving to the above dible NPV + sastl17gs Hownes a fumy managen leier fivorered that there war a mistaie in the decitonimaing procent What matake wa made? A) At To4 "NWC recover' was omitied ANWC = 45,000 must be addeiondy entered at T at Bt At T =0. NCS win inconecty entered thCS =2000000 is the certect one at Too aiset then 'AKS at Tas' thould be compily revised in 23,702. (1) Q (quantities of vit aded) D) if the enar is revised correcty then NPV of tha neplacemens proposal would be negative: the Price per unil this prepocal actualy chould hove been "regected" frather than witroted. Variatle cost per unit D) Arnual fond cont 21 Arrardinn in the helow results for the sensitivity analysis on a project, which one of the B) Price per unit C) Variable cost per unit D) Annual fixed cost 22. A firm paid $100,000 to buy its existing system 5 years ago, and its depreciation is $10,000 per year. The current market value of the existing system is $60,000, and the market value in 4 years is expected to be $20,000. A firm is considering the purchase of a $200,000 "new" computer-based inventory management system. It will be fully depreciated (to zero) straight-line over its 4-year life. It will be worth $30,000 at the end of that time. The new system allows a firm to save $60,000 before taxes in inventoryrelated costs (relative to the existing system). Since the new system is so efficient, a firm will be able to carry less total inventory and thus free up $45,000 in NWC (relative to the existing system). The required rate on this new system is 16% and the tax rate is 21%. A firm's managers have estimated the future cash flows (CF) as follows, and finally accept this replacement proposal. Note: OCF = Operating Cash Flow = EBIT + Depreciation Taxes Note: According to the above table, NPV =$68,117.95 However, a firm's managers later discovered that there was a mistake in the decision-making process. What mistake was made? A) At T=4, "NWC recovery" was omitted; NWC=45,000 must be additionally entered at T=4. B) At T=0, NCS was incorrectly entered; "NCS =200,000 is the correct one at T=0. C) At T=4, the opportunity cost was omitted; Considering the after-tax salvage value of the existing asset, then "NCS at T=4 " should be correctly revised as 23,700. D) If the error is revised correctly, then NPV of this replacement proposal would be negative; thus, this proposal actually should have been "rejected" (rather than accepted)
