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Lecture 2 Case study A plastic packaging plant is assessing two investment projects. Only one pject can be chosen. Prepare the respective calculations to help the plant to make a decision The income statement for 2018 su the year is over is as follows: A . LTD Production overheads SGRA (selling general and administrative (1001 1001 Depreciation 200 (50) 150 (30) Net profit 120 2018 will be Year o for your model when investment is made). Assume no change in working capital during the year that means that you can use income statement as a proxy of operating cash flow statement Project 1: Investment: Printing machine, cost 300 thous. eura. The life of the machine is 8 years -The printing machine will help to increase current revenue by 10% in FY 2019 [Year 1 for your model). in 2020-2027 it the revenue will stay on the level of 2019. Labor costs will increase by 5% in FY 19 and then will stay on that level for 2020-2027 Additional maintenance cost (recorded within production overheads) will amount to 10 thous. Euro per each year of projection. The machine can be sold for 30 thous. Euro at the end of 2027 Project 2: Investment: Robot, cost 150 thous. Euro. The life of robot is 8 years. The robot does not increase revenue but helps to cut expenses. Labor costs will decrease by 15% in FY 19 and will stay on that level for 2020-2027. Additional maintenance expenses - 2 thous. Euro per year starting from Year 1. The robot can be sold for 15 thous. Euro at the end of 2027