international finance

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Question

. Zain corporation ltd is trying to decide on replacement decision of its current manually operated machine with a fully automatic version. The existing machine was purchased ten years ago. It has a book value of $ 140000 and remaining life of 10 years salvage value $40000. The machine has recently begun causing problems with breakdown and it’s costing the company $ 20000 per year in maintenance expenses. The company had been offered $ 100000 for the old machinery as a trade-in on the automatic model which has a deliver price of $ 220000. It is expected to have a ten year life & a salvage value of $ 20000. The new machine will require installation modifications costing $ 40000 to the existing facilities, but it is estimated to have cost savings in materials of $ 80000 per year. Maintenance costs are included in the purchase contract and are borne by machine manufacturer. The tax rate is 40 % .Find out the relevant cash flows. May 09 2011 06:13 PM

 

Solution ID:608872 | This paper was updated on 26-Nov-2015

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