# You are required to work the following problem

Don't use plagiarized sources. Get Your Assignment on
You are required to work the following problem
Just from \$13/Page

Capital Budgeting Analysis

You are required to work the following problem, using a discounted cash flow (NPV) analysis. You should model your answer on the text approach in Chapter 8.

“Gordon Hall is considering replacing an old machine with a new one from Li Ho. The old machine (bought 5 years ago from Tom Lee) cost \$340,000, while the new one will cost \$280,000, fully financed by a 5 year 9% per annum interest only loan.

“The new machine will be depreciated prime cost to \$50,000 over its 5 year life. Gordon estimates that it will be worth \$40,000 (salvage value) after 5 years. The old machine is being depreciated at prime cost to zero over its original expected life of 10 years. However, George can sell the old machine today for \$86,000.

“The new machine will save Gordon \$70,000 a year in cooling costs. Other costs are that, one year ago, a feasibility study on the new machine conducted for Gordon by an external firm of consultants, cost Gordon \$20,000. With the new machine, Gordon will also lose \$10,000 of sales of another product to Tom Lee.

“With the new machine, a one-off amount of cleaning supplies (current assets) at a cost of \$9,000 will be required, and Henry estimates that accounts receivable (also current assets) will increase by \$14,000. Both of these increases in working capital will be recouped at the end of the new machine’s life in five years time.

“Gordon’s cost of capital is 9%. The tax rate is 30%. Tax is paid in the year in which earnings are received.

“REQUIRED.

(a) Calculate the net present value of the proposed change, that is, the net benefit or net loss in present value terms of the proposed changeover.

(b) Should Henry purchase the new machine? State clearly why.”

Calculate your paper price
Pages (550 words)
Approximate price: -

Why Choose Us

Quality Papers

At Myhomeworkwriters.com, we always aim at 100% customer satisfaction. As such, we never compromise o the quality of our homework services. Our homework helpers ensure that they craft each paper carefully to match the requirements of the instruction form.

With Myhomeworkwriters.com, every student is guaranteed high-quality, professionally written papers. We ensure that we hire individuals with high academic qualifications who can maintain our quality policy. These writers undergo further training to sharpen their writing skills, making them more competent in writing academic papers.

Affordable Prices

Our company maintains a fair pricing system for all academic writing services to ensure affordability. Our pricing system generates quotations based on the properties of individual papers.

On-Time delivery

My Homework Writers guarantees all students of swift delivery of papers. We understand that time is an essential factor in the academic world. Therefore, we ensure that we deliver the paper on or before the agreed date to give students ample time for reviewing.

100% Originality

Myhomeworkwriters.com maintains a zero-plagiarism policy in all papers. As such, My Homework Writers professional academic writers ensure that they use the students’ instructions to deliver plagiarism-free papers. We are very keen on avoiding any chance of similarities with previous papers.

Our customer support works around the clock to provide students with assistance or guidance at any time of the day. Students can always communicate with us through our live chat system or our email and receive instant responses. Feel free to contact us via the Chat window or support email: support@myhomeworkwriters.com.

Try it now!

## Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
\$0.00

How it works?

Follow these simple steps to get your paper done

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Homework Writing Services

My Homework Writers holds a reputation for being a platform that provides high-quality homework writing services. All you need to do is provide us with all the necessary requirements of the paper and wait for quality results.

## Essay Writing Services

At My Homework Writers, we have highly qualified academic gurus who will offer great assistance towards completing your essays. Our homework writing service providers are well-versed with all the aspects of developing high-quality and relevant essays.