CCA Manufacturing is considering replacing a broken metal cutting machine. Several options have been proposed. Option 1: The broken machine can be sold today for P 15,000 Option 2: It can be overhauled completely for P20000 after which it will produce P8000in annual cashflow over the next 5 years. The resale value of the asset at the end of 5years is 3,000 Option 3: It can be replaced for P 35,0o0. The life of the replacement Machine is 5 years and an estimated salvage value of of P15,000 At the end of 5 years. Anticipated operating cash inflows for each year will be P12,000. If firm's requirement rate is 12%, which option is most viable? Factor Table - i = 12.00% P/F P/A P/G F/P F/A A/P A/F A/G 0.8929 0.8929 0.000 L.1200 1.00 1.1200 1.000 0.000 0.4717 0.2963 0.5917 2 3 0.7118 0.7972 1.6901 0.7972 1.2544 2.1200 0.4717 2.4018 2.2208 1.4049 3.3744 0.4163 0.9246 4 0.6355 3.0373 4.1273 1.5735 4.7793 0.3292 0.2092 1.389 5 0.5674 3.6048 6.3970 1.7623 6.3528 0.2774 0.1574 1.7746 Option 1 PV= Option 2 PV= Option 3 PV= Answer:

CCA Manufacturing is considering replacing a broken metal cutting machine. Several options have been proposed. Option 1: The broken machine can be sold today for P 15,000 Option 2: It can be overhauled completely for P20000 after which it will produce P8000in annual cashflow over the next 5 years. The resale value of the asset at the end of 5years is 3,000 Option 3: It can be replaced for P 35,0o0. The life of the replacement Machine is 5 years and an estimated salvage value of of P15,000 At the end of 5 years. Anticipated operating cash inflows for each year will be P12,000. If firm's requirement rate is 12%, which option is most viable? Factor Table - i = 12.00% P/F P/A P/G F/P F/A A/P A/F A/G 0.8929 0.8929 0.000 L.1200 1.00 1.1200 1.000 0.000 0.4717 0.2963 0.5917 2 3 0.7118 0.7972 1.6901 0.7972 1.2544 2.1200 0.4717 2.4018 2.2208 1.4049 3.3744 0.4163 0.9246 4 0.6355 3.0373 4.1273 1.5735 4.7793 0.3292 0.2092 1.389 5 0.5674 3.6048 6.3970 1.7623 6.3528 0.2774 0.1574 1.7746 Option 1 PV= Option 2 PV= Option 3 PV= Answer:

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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