A company needs to decide whether to invest into a new machine. There is no existing machine to be replaced. The cost of
Posted: Thu Apr 28, 2022 1:28 pm
A company needs to decide whether to invest into a new machine.
There is no existing machine to be replaced.
The cost of the new machine is 400 000 €. Cash investment in
working capital for supplies and spare parts of the new machine is
20 000 €.
The new machine would have a 10 year useful life and a disposal
value of zero at the end of 10 years. Depreciation would be by
using the linear method.
The new machine will allow annual cash savings of 50 000 €
from year 1 to year 10.
Q1. How much is at the numerator of the ROI of this new
machine?
Write here your answer in a number format: 10 000
Justify the number indicated by detailing its calculation:
Average yearly savings – Annual depreciation = 50 000 –
400 000 / 10
There is no existing machine to be replaced.
The cost of the new machine is 400 000 €. Cash investment in
working capital for supplies and spare parts of the new machine is
20 000 €.
The new machine would have a 10 year useful life and a disposal
value of zero at the end of 10 years. Depreciation would be by
using the linear method.
The new machine will allow annual cash savings of 50 000 €
from year 1 to year 10.
Q1. How much is at the numerator of the ROI of this new
machine?
Write here your answer in a number format: 10 000
Justify the number indicated by detailing its calculation:
Average yearly savings – Annual depreciation = 50 000 –
400 000 / 10