Question
Swindler Ltd has completed a feasibility study costing $22,378 to determine if there is any benefit in purchasing a new asset. The machine will cost
Swindler Ltd has completed a feasibility study costing $22,378 to determine if there is any benefit in purchasing a new asset. The machine will cost $331,976 and an additional $11,128 will need to be spent to have the machine in operational state. Before the machine can be used staff must be trained at a further cost of $8,855.
The project is expected to last for 5 years and the Taxation Office has confirmed this. At the end of the project the machine will be fully depreciated.
Initial advertising costs are expected to $22,297 and additional stock of $71,498 will be needed. Wages will change from $85,000 to $53,864 and Fixed Costs will remain at $37,687.
The new machine is expected to produce sales of $1,549,364 in the first year and will grow by 11% each year of the project. Material costs will be 29% of sales in each year.
You are required to calculate the net cash flow (round to the nearest dollar and DO NOT include $ sign) that would appear in Year 1 of a Capital Budget.
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