Question 1Eden Publishing Company Limited is planning to purchase a printing machine for $9,660,000.The machine has an estimated life of 6 years. It is estimated that the machine's maintenanceexpenses are around $15,600 per year and a full-time worker will be employed at a wage ofS150,000 per year to operate the machine. Eden expects to generate income by producing348,500 item X in the first 3 years, 235,000 in the 4th year and 225,000 in the 5th and 6th year.The selling price and raw material cost for each product is $50 and S15.5 respectively. Themachine has a scrap value of $360,000 at the end of the 6th year. Suppose that the maintenanceexpenses remain no change for the 6 years. However, there is an annual rise of 3% for theworker's wage starting from the second year. (Assuming all payments and receipts occur at thebeginning or the end of a year.)Prepare a table for the cash flow of the project.а.b. Calculate the NPV of the project cost of capital at 6%.с.Based on your calculation, suggest if this is a good investment.

The expenses incurred to maintain the efficiency of the machinery are known as maintenance expenses.…

Eden Publishing Company Limited is planning to purchase a printing machine for $9,660,000. The machine has an estimated life of 6 years. It is estimated that the machine's maintenance expenses are around $15,600 per year and a full-time worker will be employed at a wage of $150,000 per year to operate the machine. Eden expects to generate income by producing 348,500 item X in the first 3 years, 235,000 in the 4th year and 225,000 in the 5th and 6th year. The selling price and raw material cost for each product is $50 and $15.5 respectively. The machine has a scrap value of $360,000 at the end of the 6th year. Suppose that the maintenance expenses remain no change for the 6 years. However, there is an annual rise of 3% for the worker's wage starting from the second year. (Assuming all payments and receipts occur at the beginning or the end of a year.) а. Prepare a table for the cash flow of the project. b. Calculate the NPV of the project cost of capital at 6%. с. Based on your calculation, suggest if this is a good investment.

Eden Publishing Company Limited is planning to purchase a printing machine for $9,660,000. The machine has an estimated life of 6 years. It is estimated that the machine's maintenance expenses are around $15,600 per year and a full-time worker will be employed at a wage of $150,000 per year to operate the machine. Eden expects to generate income by producing 348,500 item X in the first 3 years, 235,000 in the 4th year and 225,000 in the 5th and 6th year. The selling price and raw material cost for each product is $50 and $15.5 respectively. The machine has a scrap value of $360,000 at the end of the 6th year. Suppose that the maintenance expenses remain no change for the 6 years. However, there is an annual rise of 3% for the worker's wage starting from the second year. (Assuming all payments and receipts occur at the beginning or the end of a year.) а. Prepare a table for the cash flow of the project. b. Calculate the NPV of the project cost of capital at 6%. с. Based on your calculation, suggest if this is a good investment.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 8PROB

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