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QUESTION 1 (4 Cartridge Printers (Pty) Ltd is considering replacing one of their old heavy du machines to increase sales and decrease input costs.
QUESTION 1 (4 Cartridge Printers (Pty) Ltd is considering replacing one of their old heavy du machines to increase sales and decrease input costs. The new machine will cost the company R15 625 000. All other costs to get the ready for use will amount to R1 562 500. The new machine's estimated usefu years, and depreciation will be written off using the straight-line method. The estimated selling price at the end of its useful life amounts to R3 906 250 The current machine has a useful life of 10 years, of which 5 years remain. At the machine's useful life, the market value will be R781 250, while the current total cost price amounts to R8 593 750. Cartridge Printers has a potential buy existing machine, and the buyer is willing to pay R3 125 000. Cartridge Printers estimate sales to increase by R3 906 250 and operation decrease by R1 562 500. The company has a required rate of return of 12%, and the tax rate is 28%.
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