Homework Help is Here – Start Your Trial Now!
Science
Chemistry
Wonder Works Pte Ltd (WW') produces hair curlers. The equipment for this task cost WW $70,000 four years ago. The reduced book value now stands at $45,000. An improved version of the machine is currently available for $139,350. The new machine has a useful life of five years. The disposal value at that point in time is estimated to be $20,000. The new machine is expected to increase unit sales by 6,000 curlers per annum. The estimated unit selling price is $35 for the first year. The following table provides the unit costs for the first year: $Direct labour, 5 hours at $2 per hour 10 Direct materials7 Fixed costs including depreciation11 Total28 WW is short of production workers due to the COVID-19 pandemic in Singapore. It has decided to divert some labour from another project to the new project. These workers earn a contribution of $2 per direct labour hour in their original department. The fixed overhead cost would be $2.20 per hour and this is expected to remain unchanged.The sales agreement for the curlers allows the selling price to rise at the rate of 10 percent per year after the first year. The unit costs, except for fixed costs, is expected to increase at the same rate as the selling price. Working capital requirements are expected to be $ 15,000 in the first and second years, increasing to $ 18,000 in the third year and is expected to remain at this level till the end of the project. All the amounts of working capital will be recovered at the time of project termination. WW enjoys a tax holiday for the next five years. The required return for projects of this risk class is 27 percent per annum. Required: a. Derive the yearly net cash flows for the project. ( using a tabel) b. Make a reasoned recommendation as to whether WW should proceed to purchase the new machine.( NPV method) c. Conduct sensitivity analysis on the cost of capital to achieve a net present value of $30,000. Utilize the IRR approach with the r trial values of 18% and 22%.

Wonder Works Pte Ltd (WW') produces hair curlers. The equipment for this task cost WW $70,000 four years ago. The reduced book value now stands at $45,000. An improved version of the machine is currently available for $139,350. The new machine has a useful life of five years. The disposal value at that point in time is estimated to be $20,000. The new machine is expected to increase unit sales by 6,000 curlers per annum. The estimated unit selling price is $35 for the first year. The following table provides the unit costs for the first year: $Direct labour, 5 hours at $2 per hour 10 Direct materials7 Fixed costs including depreciation11 Total28 WW is short of production workers due to the COVID-19 pandemic in Singapore. It has decided to divert some labour from another project to the new project. These workers earn a contribution of $2 per direct labour hour in their original department. The fixed overhead cost would be $2.20 per hour and this is expected to remain unchanged.The sales agreement for the curlers allows the selling price to rise at the rate of 10 percent per year after the first year. The unit costs, except for fixed costs, is expected to increase at the same rate as the selling price. Working capital requirements are expected to be $ 15,000 in the first and second years, increasing to $ 18,000 in the third year and is expected to remain at this level till the end of the project. All the amounts of working capital will be recovered at the time of project termination. WW enjoys a tax holiday for the next five years. The required return for projects of this risk class is 27 percent per annum. Required: a. Derive the yearly net cash flows for the project. ( using a tabel) b. Make a reasoned recommendation as to whether WW should proceed to purchase the new machine.( NPV method) c. Conduct sensitivity analysis on the cost of capital to achieve a net present value of $30,000. Utilize the IRR approach with the r trial values of 18% and 22%.

Chemistry
Chemistry
10th Edition
ISBN:9781305957404
Author:Steven S. Zumdahl, Susan A. Zumdahl, Donald J. DeCoste
Publisher:Steven S. Zumdahl, Susan A. Zumdahl, Donald J. DeCoste
Chapter1: Chemical Foundations
Section: Chapter Questions
Problem 1RQ: Define and explain the differences between the following terms. a. law and theory b. theory and...
See similar textbooks
icon
Related questions
Question
Wonder Works Pte Ltd (WW') produces hair curlers. The equipment for this task cost WW $70,000 four years ago. The reduced book value now stands at $45,000. An improved version of the machine is currently available for $139,350. The new machine has a useful life of five years. The disposal value at that point in time is estimated to be $20,000. The new machine is expected to increase unit sales by 6,000 curlers per annum. The estimated unit selling price is $35 for the first year. The following table provides the unit costs for the first year: $Direct labour, 5 hours at $2 per hour 10 Direct materials7 Fixed costs including depreciation11 Total28 WW is short of production workers due to the COVID-19 pandemic in Singapore. It has decided to divert some labour from another project to the new project. These workers earn a contribution of $2 per direct labour hour in their original department. The fixed overhead cost would be $2.20 per hour and this is expected to remain unchanged.The sales agreement for the curlers allows the selling price to rise at the rate of 10 percent per year after the first year. The unit costs, except for fixed costs, is expected to increase at the same rate as the selling price. Working capital requirements are expected to be $ 15,000 in the first and second years, increasing to $ 18,000 in the third year and is expected to remain at this level till the end of the project. All the amounts of working capital will be recovered at the time of project termination. WW enjoys a tax holiday for the next five years. The required return for projects of this risk class is 27 percent per annum. Required: a. Derive the yearly net cash flows for the project. ( using a tabel) b. Make a reasoned recommendation as to whether WW should proceed to purchase the new machine.( NPV method) c. Conduct sensitivity analysis on the cost of capital to achieve a net present value of $30,000. Utilize the IRR approach with the r trial values of 18% and 22%.
Transcribed Image Text:Wonder Works Pte Ltd (WW') produces hair curlers. The equipment for this task cost WW $70,000 four years ago. The reduced book value now stands at $45,000. An improved version of the machine is currently available for $139,350. The new machine has a useful life of five years. The disposal value at that point in time is estimated to be $20,000. The new machine is expected to increase unit sales by 6,000 curlers per annum. The estimated unit selling price is $35 for the first year. The following table provides the unit costs for the first year: $Direct labour, 5 hours at $2 per hour 10 Direct materials7 Fixed costs including depreciation11 Total28 WW is short of production workers due to the COVID-19 pandemic in Singapore. It has decided to divert some labour from another project to the new project. These workers earn a contribution of $2 per direct labour hour in their original department. The fixed overhead cost would be $2.20 per hour and this is expected to remain unchanged.The sales agreement for the curlers allows the selling price to rise at the rate of 10 percent per year after the first year. The unit costs, except for fixed costs, is expected to increase at the same rate as the selling price. Working capital requirements are expected to be $ 15,000 in the first and second years, increasing to $ 18,000 in the third year and is expected to remain at this level till the end of the project. All the amounts of working capital will be recovered at the time of project termination. WW enjoys a tax holiday for the next five years. The required return for projects of this risk class is 27 percent per annum. Required: a. Derive the yearly net cash flows for the project. ( using a tabel) b. Make a reasoned recommendation as to whether WW should proceed to purchase the new machine.( NPV method) c. Conduct sensitivity analysis on the cost of capital to achieve a net present value of $30,000. Utilize the IRR approach with the r trial values of 18% and 22%.
Expert Solution
steps

Step by step

Solved in 2 steps with 6 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Chemistry
Chemistry
Chemistry
ISBN:
9781305957404
Author:
Steven S. Zumdahl, Susan A. Zumdahl, Donald J. DeCoste
Publisher:
Cengage Learning
Chemistry
Chemistry
Chemistry
ISBN:
9781259911156
Author:
Raymond Chang Dr., Jason Overby Professor
Publisher:
McGraw-Hill Education
Principles of Instrumental Analysis
Principles of Instrumental Analysis
Chemistry
ISBN:
9781305577213
Author:
Douglas A. Skoog, F. James Holler, Stanley R. Crouch
Publisher:
Cengage Learning
Organic Chemistry
Organic Chemistry
Chemistry
ISBN:
9780078021558
Author:
Janice Gorzynski Smith Dr.
Publisher:
McGraw-Hill Education
Chemistry: Principles and Reactions
Chemistry: Principles and Reactions
Chemistry
ISBN:
9781305079373
Author:
William L. Masterton, Cecile N. Hurley
Publisher:
Cengage Learning
Elementary Principles of Chemical Processes, Bind…
Elementary Principles of Chemical Processes, Bind…
Chemistry
ISBN:
9781118431221
Author:
Richard M. Felder, Ronald W. Rousseau, Lisa G. Bullard
Publisher:
WILEY
SEE MORE TEXTBOOKS