A farmer in China is considering three alternative machines. Machine A will cost K18,000. Machine B will cost K16,000, while Machine C will cost K13,800. Machine A will generate a constant net cash income amount of K5000 for 5 years, with a salvage value K6000. Machine B will generate K7,000, K6000, K5,000, K4,000, K3000 from year 1 to 5 respectively with a salvage value of K3000, Machine C is a used machine and will generate net cash flow for 3 years, K6000, K5500, K4000 and will have a salvage value of K4500. All three machines can be depreciated use a straight-line method. Machine A will attract a TSIC of 3000, B will attract a TSIC of K2500 and machine C will attract a TSIC of K2350. Income generated from all machines are subject to a 37.5% tax. (Note: use 5 decimals for the discount factor and 2 decimals for the NPV) a. Assume no debt capital is used, use the NPV method to select the most profitable machine. b. Which one is the second profitable machines.
Please no written by hand solutions
A farmer in China is considering three alternative machines. Machine A will cost K18,000. Machine B will cost K16,000, while Machine C will cost K13,800. Machine A will generate a constant net cash income amount of K5000 for 5 years, with a salvage value K6000. Machine B will generate K7,000, K6000, K5,000, K4,000, K3000 from year 1 to 5 respectively with a salvage value of K3000, Machine C is a used machine and will generate net cash flow for 3 years, K6000, K5500, K4000 and will have a salvage value of K4500. All three machines can be
a. Assume no debt capital is used, use the NPV method to select the most profitable machine.
b. Which one is the second profitable machines.
Step by step
Solved in 3 steps
