Please explain with systematic steps and also please show how the cash flow. sol
ID: 1131407 • Letter: P
Question
Please explain with systematic steps and also please show how the cash flow. solve using the tables not equations
Q3 You are an engineer who is managing a project to possibly replac equipment for your company. You collected the following data: e construction current equipment can still do work for the company for five more years generating SR 10 Million per year The current equipment need annual maintenance cost of SR 1 Million If you decide to sell the current equipment, it will bring a salvage value of SR 50 Million . .If you keep the equipment for five more years, salvage value will be S · If you decide to replace the current equipment, the new equipment cost is S R 100 Million New equipment has little annual maintenance cost of SR 0.2 Million . New equipment will generate annual revenue of SR 25 Millio The new equipments salvage value after 5 years will be 30,000,000 Your company MARR is 15% Using Present Worth amalysis, wouldyou rplace h cumet quigment or kep in Please explain you answer.Explanation / Answer
Old Machine New Machine Annual Revenue $10,000,000 Equipment Cost $100,000,000 Annual Maintainance Cost ($1,000,000) Annual Revenue $25,000,000 Salvage Value $50,000,000 Annual Maintainance Cost $200,000 Net Revenue $9,000,000 Salvage Value $30,000,000 Salvage Value from Old Machine $20,000,000 1.15 Net Revenue $24,800,000 1 0.869565217 2 0.756143667 3 0.657516232 4 0.571753246 5 0.497176735 3.352155098 PW of Net Revenue $30,169,395.88 PW of Net Revenue $83,133,446.43 PW of Salvage Value of Old Machine $24,858,836.76 PW of Salvage Value of Old Machine $24,858,836.76 PW of Net Benefits of Old Machine $55,028,232.65 PW of Benefits $107,992,283.20 PW of Cost ($100,000,000.00) PW of Net Benefits of New Machine $7,992,283.20 PW of Net Benefits of Old Machine> PW of Net benefits of New Machine. Hence keep the old machine