Shricves Casting Company is considering adding a new line to its product mix. The production line would be set up in a section of Shricves's main plant. This section is currently being rented out to an outside party for $20,000 per year. The machinery's invoice price would be $250,000, another $15,000 in shipping charges would be requirext, and it would cost an additional $35,000 to install the equipment. The machinery has an economie life of 4 years and would be in Class 8 with a CCA rate of 20%, The machinery is cxpected to have a salvage value of $20,000 after 4 years of usc. Furthermore, to handle the ncw line, the firm's nct opcrating working capital would increase by $40,000. The new line would generate sales of 1,300 units per year for 4 years. The estimated selling price and cost per unit are: Selling price per unit: $190 Cost per unit: 5110 The firm's tux rate is 30%, and its overall weighted avcruge cost of capital is 12% Calculate the following: enter answers with commas but without dollar sign c.g. 100,000 and not 100,000) Initial investment: Capital cost of the equipment Initial working capital requirement Annual uter-tax cash inflows: Sales Cost of goxls sold Cost of goods sold Before tax cash inflows After-tax cash inflows Present value of cash flow Total present value of cash outflows Present value (P. V of cash inflow P. V of annual after-tax cash inflows P. V of salvage value P.V of working capital recovered P.V of CCA tax shield Total PV of cush inflows NPV and decision Net present value Should the project be undertaken (answer Yes or No) Shricves Casting Company is considering adding a new line to its product mix. The production line would be set up in a section of Shricves's main plant. This section is currently being rented out to an outside party for $20,000 per year. The machinery's invoice price would be $250,000, another $15,000 in shipping charges would be requirext, and it would cost an additional $35,000 to install the equipment. The machinery has an economie life of 4 years and would be in Class 8 with a CCA rate of 20%, The machinery is cxpected to have a salvage value of $20,000 after 4 years of usc. Furthermore, to handle the ncw line, the firm's nct opcrating working capital would increase by $40,000. The new line would generate sales of 1,300 units per year for 4 years. The estimated selling price and cost per unit are: Selling price per unit: $190 Cost per unit: 5110 The firm's tux rate is 30%, and its overall weighted avcruge cost of capital is 12% Calculate the following: enter answers with commas but without dollar sign c.g. 100,000 and not 100,000) Initial investment: Capital cost of the equipment Initial working capital requirement Annual uter-tax cash inflows: Sales Cost of goxls sold Cost of goods sold Before tax cash inflows After-tax cash inflows Present value of cash flow Total present value of cash outflows Present value (P. V of cash inflow P. V of annual after-tax cash inflows P. V of salvage value P.V of working capital recovered P.V of CCA tax shield Total PV of cush inflows NPV and decision Net present value Should the project be undertaken (answer Yes or No)
