Question

2019. Swwyo A C pt X Company is consideri n g of current machine are 000 per yererating machine will cost $74.000 and will last for four year last for four more years but will not be wo only $5.000. As discount rate of with the new machine? 9. A0 $45 BO 851 CO . mac with be worth bewer 059, wh thing at that time. It order to save rating costs Operating with the , at w wmachine are expected to be 43.000 yearThe new me it can be sold for $3.000. The current machine will also at that time. It t o three years that is currently worth e incrementale value of laring the current machine POSSIT COD E 576 10 FOSS FO 8 pt X Company is planning to launch a new year, indicating that the product will be successful to be $178,000 in each of the first two years an inmediate advertising campaign that will con $380,000; it will have zero disposal present value of launching the new product? 10. AO $16,579 BO $20,724 CO Product A market research study coating S100,000, was conducted in for the next four years Profit from sales of the product are expected years and S100,000 in each of the last two years. The com posal value 79.000. New manufacturing ouipment will have to be purchased for Wyears. The company plans to undertake e four years. Assuming a discount rate of 7%, what is the net 8pt X Company must replace one of machines is on DO 532,381 EO $40,477 FO 850,696

Answer 1

Solution 9:

Computation of NPV - Replacement proposal of Equipment - X Company
Particulars	Period	Amount	PV Factor	Present Value
Cash Outflows:
Cost of new Equipment	0	$74,000	1	$74,000
Sale value of old equipment	0	-$5,000	1	-$5,000
Present value of cash outflows (A)				$69,000
Cash Inflows:
Annual cost savings	1-4	$19,000	3.546	$67,374
Difference in Salvage value of old and new machine	4	$3,000	0.823	$2,469
Present value of cash Inflows (B)				$69,843
NPV (B-A)				$843

Hence option F is correct.

Solution 10:

Computation of NPV - X Company
Particulars	Period	Amount	PV factor	Present Value
Cash outflows:
Initial investment (Equipment + Advertising)	0	$459,000.00	1	$459,000
Present Value of Cash outflows (A)				$459,000
Cash Inflows
Year 1	1	$178,000.00	0.935	$166,430
Year 2	2	$178,000.00	0.873	$155,394
Year 3	3	$100,000.00	0.816	$81,600
Year 4	4	$100,000.00	0.763	$76,300
Present Value of Cash Inflows (B)				$479,724
Net Present Value (NPV) (B-A)				$20,724

Hence option B is correct.