FIN3701 ASSESSMENT 1 SEM 2 OF 2024 EXPECTED ANSWERS

1.1 & 1.2
Machine A OSCAR THE TUTOR
year Cashflow Discound Factor
+27737560989
0 -92000 1.0000 -92000.00 for FAC MAC ECS DSC TAX QMI FIN INV
1 12000 0.8929 10714.29 BNU STA tutorials
2 12000 0.7972 9566.33
3 12000 0.7118 8541.36
4 12000 0.6355 7626.22
5 12000 0.5674 6809.12
6 12000 0.5066 6079.57
NPV -42663.11
PVIF(12%,6) 4.1114
ANPV -10376.7661
IRR -7%

Machine B
year Cashflow Discound Factor
0 -65000 1.0000 -65000.00
1 10000 0.8929 8928.57
2 20000 0.7972 15943.88
3 30000 0.7118 21353.41
4 40000 0.6355 25420.72
NPV 1.0000 6646.58
PVIF(12%,4) 3.0373
ANPV 2188.282872
IRR 16%


Machine C
year Cashflow Discound Factor
0 -100500 1.0000 -100500.00
1 30000 0.8929 26785.71
2 30000 0.7972 23915.82
3 30000 0.7118 21353.41
4 13000 0.6355 8261.74
5 30000 0.5674 17022.81
NPV -3160.52
PVIF(12%,5) 3.6048
ANPV -876.7593562
IRR 11%
1.3

Based on NPV AND IRR, MACHINE B SHOULD BE CHOSEN AS IT HAVE
A POSITIVE NPV AND IRR HIGHER THAN COST OF CAPITAL

, Given:

Selling Price per Unit: 85
Variable Cost per Unit: 38
Units Sold per Year 70000
Annual Reduction in Production
Costs: 180000
Tax Rate: 28%




3.1)
Proceeds from the sale of current
equipment
Market value of current equipmenT 410000
Tax value of current equipment -300000
Capital gain 110000
Capital gains tax @28 30800
Proceeds from the sale(Market value -
Tax payable) 379200




3.2)
Initial investment

Cost of new equipment: 8500000
Proceeds from sale of old
equipment: -379200
Investment in net working capital:
475000
8595800