King Catering makes cutlery for restaurants and hotels, it is currently using a model 26XL shaping machine to make one o

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King Catering makes cutlery for restaurants and hotels, it is
currently using a model 26XL shaping machine to make one of its
products. It bought the equipment four years ago for $165,000. The
present book value is $99,000, its present market value is
$90,000.
We are January 1st 2022: The company is expected
to have a large increase in demand for the product and is anxious
to expand its productive capacity.
There are two possibilities under consideration:
2022: 20,000 units
2023: 30,000 units
2024: 40,000 units
2025 to 2031 : 45,000 units per
year
The required rate of return for the project is 10%.
1) Using NPV, which alternative should be used? SHOW
COMPUTATIONS (25 points)
2) Suppose that the cost of labor increases by 30%, how
would it change your answer?
SHOW COMPUTATIONS (20 points)
3) Suppose that the cost of direct materials increase by
50%, how would it change your answer?SHOW COMPUTATIONS (20
points)
4) Suppose that a tax rate of 30% is applied, how would
it change your answer?
SHOW COMPUTATIONS (25 points)
5) How would an inflation going up to 15% affect your
capital budgeting decision? Explain without computations. (10
points)
All assignment will be on paper with cover page AND YOUR
NAME, NO PDF FIL