Question Last year, Bryce Canola Oil Company paid a consultant $12,000 to conduct an analysis on how to improve its operations. One outcome of this, resulted in a recommendation by the consultant, to consider the replacement of its operating equipment. The company now plans to replace its old harvester machine with a new one, to speed up its production process. The machine will cost the company$1 milion, inclusive of delivery and set-up charges. The machine can be depreciated on a straight-line basis over five years. This capital expenditure qualifies for the recently announced 4% Investment allowance for agribusiness, by the Federal Government If the company proceeds with the replacement, the old harvester machine will be sold today, for $180,000. It hasn't been fully deprecated, and currently has a book value of$200,000 The new harvester will speed up production in the canola fieldo by 50%, and the company expects revenues to increase from $1.2 million per year to$2.1 milion per year. However, expanded production will increase operating costs by $440,000 each year. The new harvester will have to be insured at an additional cost of$25,000 per year, where insurance premiums are paid at the start of each year. At the end of five years, the company expects to sell the new harvester for a salvage value of $200,000, The company will incur a new bank loan to fund this purchase and the lender has indicated an interest rate of 7.5% pa. The company's tax rate is 30%. The firm typically applies an after tax required rate of return based on its WACC for routine equipment replacement proposals. This rate will be 9% p.a., considering the impact of the new bank loan. The company also typically prefers projects that take less than 2 years to recover the initial investment Tasks • Set up a table of incremental cash flows over the useful life of this machine (6 marks) • Calculate the Net Present Value (NPV), Internal Rate of Return (IRR), the Profitability Index (PI) and the Payback Period for this investment proposal. (2 marks) ## Answers #### Similar Solved Questions 1 answer ##### A dapped-end bearing connection in a precast concrete beam is shown. reinforcement bars The function of... A dapped-end bearing connection in a precast concrete beam is shown. reinforcement bars The function of the indicated reinforcement bars is primarily to resist & O (A) bending caused by the eccentricity of the vertical reaction O (B) shear-friction reinforcement (C) confinement to prevent compre... 1 answer ##### It's due tonight. Thanks! Part 1 refer to pages 370 and 371 answer to the following... It's due tonight. Thanks! Part 1 refer to pages 370 and 371 answer to the following (10 pts) Outline (list)managed care requirements for patient referrals. Medicaid patients before the fifth of each month. This allows ample time for the beneficiary to receive the medical coupon. If the patient p... 1 answer ##### 5. Consider an asymm etric top with principle moments of inertia 13 〉 12 〉五. Write Euler's equations. Are rotati... 5. Consider an asymm etric top with principle moments of inertia 13 〉 12 〉五. Write Euler's equations. Are rotations around which principle axis xi, r2, r3 stable? What are frequencies of small oscillations near stable solutions? 5. Consider an asymm etric top with principle... 1 answer ##### For your choice of input voltage, load resistor and the value of the ripple voltage (as percent of Vdc) design a circuit for the half-wave rectifier. Assuming the value of Van for the diode, calc... For your choice of input voltage, load resistor and the value of the ripple voltage (as percent of Vdc) design a circuit for the half-wave rectifier. Assuming the value of Van for the diode, calculate theoretically all parameters of the rectifier: Vp, Vdc, Idc, C, Isc, PIV and diode conducting inter... 1 answer ##### Attaced the correct answer if you did not get the same DON'T POST IT For the... attaced the correct answer if you did not get the same DON'T POST IT For the MOSFET bias circuit shown, what value of Rd in kilohms is needed to allow the maximum possible peak-to- peak signal swing on the drain without clipping? Use: Vdd = 6V, Vss =-7V, Vg = 1.5V, Rs 9.7kQ, Vt =-0.5V, and IVonl... 1 answer ##### 1/ In its first year of operations Best Corp. had income before tax of$480,000. Best...
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