The TMA Questions PART A: Investment appraisal Salam Ltd Company currently sends out its vehicles for painting to specialist firms. During the last financial year, the number of vehicles painted was 796 at a cost of f224,472. You are considering the possibility of this work being undertaken by the company in a workshop set up for this purpose. The following information relates to the project: 1- The paint shop can be set up in an existing building that has not been used for some years and is estimated to be worth $250,000. 2- Equipment costing f480,000 needs to be purchased with a life expectancy of 6 years. The residual value is estimated as $96,000 at the end of year 6. 3- The annual costs in today's money of the operation are estimated to be: Rates and maintenance $17,920 Management E21,400 Labour $46,970 Head office costs E25,000 4- Based on the number of vehicles painted last year, the cost of consumable materials and other variable costs is estimated at $30,248 based on the number of vehicles painted last year. 5- Tax will be recoverable in year 2 and payable thereafter as shown below: Year 2 $25,220 Recoverable Year 3 $10,780 Payable Year 4 $16,180 Payable Year 5 E20,230 Payable Year 6 f23,268 Payable Year $46,049 Payable The head office costs are a re-allocation of existing overheads