The objective of this assignment is to provide students with the opportunity to perform investment evaluation in practical application of capital budgeting concept, to identify relevant facts in performing qualitative and quantitative analysis, and to be able to apply quantitative reasoning, critical and creative thinking, and communication, and problem-solving skills.
You will be reading the case, research relevant facts, perform analysis, and document your findings, analysis, and recommendation in a written report to John Davidson to assist in the decision of whether to buy the new machine or maintaining the existing one.
You may consider the following guided questions to prepare your report. If you have made assumption(s) as part of the case analysis, please include them in the report.
1• Using NPV analysis, should Magic Timber and Steel (Magic) purchase the new Delta finishing machine?
2• What other quantitative and/or qualitative factors (see below) need to be taken into consideration?
3• Sensitivity analysis (e.g., different discount rates, different selling prices, change in maintenance cost)
4• You may assume discount rate as 12% and tax rate as 30%.
1• Salvage value, Repair, Maintenance, Scheduled service, Machine Sales
1• Machine investment, Labour savings, Electricity savings, Maintenance, Salvage value, Profit/Loss from sale
1• Depreciation (given in case)
1• Depreciation (10% per year of cost $130,000)
Tax Impact relevant Cash Flows:
Which of the above cash flows and non-cash flows could impact the cash flow for tax saving/payment?
• Savings (+ taxable income), Costs (- taxable income), Depreciation (Matrix, Delta), Profit/Loss from Sale
Cash Flows for NPV:
Which of the above cash flows (including tax impact relevant cash flows) are relevant for purchase of Delta decision?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more