What is the present value of the purchase price? What is pv of the sale price of the old machine Number Number What is the PV of the working capital invesment? What is net after tax cashflow for the first 5 years? Number Number What is net after tax cashflow for year 6? What is net after tax cashflow for years 7 to 9? Number Number
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Apothic Inc is nestled in the beautiful wine country of British Columbia. It is considering the purchase of ten hydraulic ice win press machines for a total price of $250,000. The firms old press machines have a book value of $85,000, but can only be sold for $57,000.00
The new hydraulic press machines are estimated to attract additional customers and will generate annual revenue of $62,000 for the first 6 years and decreasing to 58,000 for the next 4 years. Annual operating expenses will be 23% of the revenue. Working capital of 31,000 will have to be injected at the start of operation to support the increased sales.
At the end of year 6, a capital upgrade will cost $15,000. At the end of year 10, the press machines can be salvaged tor $37,500. Apothic Inc. is in the 40% tax bracket and has 12% cost of capital. The capital cost allowance of the machine is 30%
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