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Responding to the new capital city of Indonesia, PT Transportasi Top is considering overhauling its existing cargo. The proposed expenditures are summarized as follows: Overhaul
Responding to the new capital city of Indonesia, PT Transportasi Top is considering overhauling its existing cargo. The proposed expenditures are summarized as follows: Overhaul engine and Rp 340.000.000,- generators Replace radar and other Rp 75.000.000,- equipment Repair to restructure Rp 310.000.000.- Painting Rp 95.000.000,- The expenditures could be written off immediately for tax purposes. In addition, following costs are expected during post-overhaul periods: Fuel Rp 450.000.000,- Labor and benefits Rp 480.000.000,- Maintenance Rp 141.000.000,- Other Rp 110.000.000, Those costs are expected to increase 2,5 percent per year (inflation). The existing cargo has related inventories that could be sold immediately for Rp 200.000.000,- with Rp 60.000.000,- taxable gain. There is an enhanced option with additional overhaul costs Rp 600.000.000,- with post- overhaul period costs as follows: Fuel Rp 400.000.000,- Labor and benefits Rp 405.000.000,- Maintenance Rp 105.000.000,- Other Rp 110.000.000,- The expected revenues of overhauled cargo are Rp 1.400.000.000,- per year, increasing with inflation thereafter. The overhauled cargo is expected to operate for the next 12 years. The fimm nominal opportunity cost of capital is 11 percent and the corporate tax rate is 21 percent. Required: Calculate the NPV of PT Transportasi Top's overhauling cargo proposall Your calculation MUST include the incessary assumptions and brief explanation. Any UNCLEAR calculation will result in ZERO marks
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