Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The PC Company is considering adding a machine to its production line. The machine s base price is Rs 2 0 0 0 0 ,

The PC Company is considering adding a machine to its production line. The machines base price is Rs 20000, and it would cost another Rs 5000 to install it. The machine falls into the depreciation of 3-year class, and it would be sold after 3 years for Rs 4500. The depreciation rates for the first 3 years are 0.2,0.3, and 0.4 of the initial buying prices (including machine base price + installation cost). The machine would require an increase in net working capital (inventory) of Rs.5000 for the whole life of the machine and working capital will not be recovered. The machine will generate a revenue of 14,000 per year in before tax for the next three years. PC Companys marginal tax rate is 35%. Would you like to buy the machine?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Happy Retirement Fun Things To Do From Home Hobbies To Wild Freedom

Authors: Leon Simonds

1st Edition

979-8863179216

More Books

Students also viewed these Finance questions