S.

No
1
2
3
4

Year
1996
1997
1998
1999

Compound Growth Rate

Revenue Earning After Tax

6000
440
6900
464
7866
538
8445
652
8.92%

10.33%

USMAN NASIR

N NASIR (MBA 123997)

a). Salvage Value

Probability
Estimate
0.3
5000
0.2
7000
0.5
6500
Salvage value
b). New Machine annual Depreciation
Cost of Automaster
(-)Salvage value
Remaining
Annual depreciation
c). Old Machine annula Depreciation
Old Machine
Annaul Dep.

Value
1500
1400
3250
6150
60000
6150
53850
6731.25
24000
2400

Year
New Machine
Old Machine
Difference in Dep.
Tax Rate
Tax savings

1
6731.25
2400
4331.25
30%
1299.375

Tax saving from Depreciation

2
3
4
6731.25
6731.25
6731.25
2400
2400
2400
4331.25
4331.25
4331.25
30%
30%
30%
1299.375
1299.375
1299.375

New machine annula Depreciation

60000
0
6731.25
53268.75
1
6731.25
46537.50
2
6731.25
39806.25
3
6731.25
33075.00
4
6731.25
26343.75
5
6731.25
19612.50
6
6731.25
12881.25
7
6731.25
6150.00
8
Remaining Value
Net Salvage

5
6731.25
2400
4331.25
30%
1299.375

6
6731.25
2400
4331.25
30%
1299.375

Sale of old machine

cost
15000
Tax
30%
Sale

10500

6150.00
4305.00

USMAN NASIR (MBA

Cashflows
7
6731.25
2400
4331.25
30%
1299.375

8
6731.25
2400
4331.25
30%
1299.375

Year
Purchase of Automaster I
Sale of Old Machine
Tax Savings
Net Salvage
Net Working Capital
Net Operating Income

0
-60000
10500

Net Cashflow

-51500

SIR (MBA 123997)

1299.375
-2000
8400

Rate
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%

9699.375
NPV
32400.00
28539.05
24933.85
21563.85
18410.42
15456.60
12686.95
10087.43
7645.20
5348.55
3186.78
1150.08
-770.52
-2583.24
-4295.64
-5914.67
-7446.70

Cashflows
2

1299.375 1299.375 1299.375 1299.375 1299.375 1299.375 1299.375

4305
2000
8400
8400
8400
8400
8400
8400
8400
9699.375 9699.375 9699.375 9699.375 9699.375 9699.375 16004.38
IRR

NPV Profile
35000
30000
25000
20000

11.592%

15000
10000
5000
0
-50000%
-10000

1%

2%

3%

4%

5%

6%

7%

8%

9% 10% 11% 12% 13% 14% 15% 16%

2% 13% 14% 15% 16%

Q.1
Q.4
Q.5
Q.6
Q.7
Q.8
Q.9
Q.10

PLEASE REFER TO THE WORD DOCUMENT ATTACHED

Yes, the NPV at 8% cost of capital is 7645 and IRR is 11.592%. Thus, replacement will result in economic benefits.
Yes
Accodng to ethical responsibility and commitement, they should not reduce the workforce.
PLEASE REFER TO THE WORD DOCUMENT ATTACHED
PLEASE REFER TO THE WORD DOCUMENT ATTACHED
Although the probability estimates of new machine seems reasonable (the salvage value is equal to the estimates) but this shoul
independent assement rather than manufacturers involovement

Yes, given the balance sheet composition of the company and project revienues, an unforeseen obsolescene will significantly im

USMAN NASIR (MBA 1