Döveç Group of Companies is one of the largest Property Developing companies in Cyprus, with more than 30 years of extensive experience in the construction and Real Estate sector. Döveç Group of Companies wants to run with the replacement project. Here is the information about the project: - The cost of equipment is $400,000. It also requires to be shipped & installed for $10,000. - The new equipment replaces the old equipment, an additional investment of $20,000 in net working capital will be required, and the tax rate is 33 percent, and the required rate of return is 15 percent. - The project life is 6 years, but the fixed capital has a 3-year class life. Simplified straight line depreciation. -Current operating expenses are $640,000 per year and new operating expenses will be $400,000 per year. - The book value of old equipment is zero and there are no proceeds from sale of an old equipment in the year 0. - Sunk costs $250,000. - Salvage value at the terminal year is $190,000. Required: Calculate the economic income and economic return. Show all necessary changes and calculations.
Döveç Group of Companies is one of the largest Property Developing companies in Cyprus, with more than 30 years of extensive experience in the construction and Real Estate sector. Döveç Group of Companies wants to run with the replacement project. Here is the information about the project:
- The cost of equipment is $400,000. It also requires to be shipped & installed for $10,000.
- The new equipment replaces the old equipment, an additional investment of $20,000 in net working capital will be required, and the tax rate is 33 percent, and the required
- The project life is 6 years, but the fixed capital has a 3-year class life. Simplified straight line
-Current operating expenses are $640,000 per year and new operating expenses will be $400,000 per year.
- The book value of old equipment is zero and there are no proceeds from sale of an old equipment in the year 0.
- Sunk costs $250,000.
- Salvage value at the terminal year is $190,000.
Required:
Calculate the economic income and economic return. Show all necessary changes and calculations.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
