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The company Smart Inc. is a company that produces T-shirts in Toronto area. The results of the company which has been mediocre for the past
The company Smart Inc. is a company that produces T-shirts in Toronto area. The results of the company which has been mediocre for the past couple of years have been presented in the annual financial statement. Sales (1 million units x 168) Fixed Costs Variable Costs (1 million units x 10S) Depreciation Profit (loss) 16 000 000S (10 000 000) (10 000 000) (3 000 000) (7 000 000) According to the experts, this loss has been caused by the poor performance of the equipment in the factory. They suggest to the board of directors to replace the old equipment by new ones. Considering following information, the board of directors asks you to evaluate this project for the company The new equipments would increase the level of production and allow the company to avoid this loss entirely, but there is no projection concerning any profit. The purchase (including the installation) of the new equipment requires an initial investment for an amount of 18 000 000S. The the market for 1 800 000S (This amount is NOT considered as an exchange value) old equipment can be sold in the beginning of project on
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