Can someone help me with the following probem ? Any help is greatly appreciated.
ID: 2650871 • Letter: C
Question
Can someone help me with the following probem ? Any help is greatly appreciated. Thanks...
The injection molding machines are need to be replaced. The list is narrowed down to two options based on various parameters like The injection molding machines are aed to be replaced. The last is namowed doun to two options based on various parameters Bke screw diameter, injection pressure, injection capacity, rate, and screw rpm and so on. Please take a look at the specs and make a recommendation. The Cincinnati Milacron Plastic Injection Molding Machine costs $80,000 and the Kawaguchi machine costs $120,000. Based on the capacity of these machines, it can be safely estimated that the revenue for Cincinnati will be S30,000 for year 1 and S41,500 for Kawaguchi It is also assumed that the capacity could be increased and thereby the revenue by 20% for the next few' years. The maintenance costs will be $2,000 and the amount will increase by S5,000 each year for the next few years. It can be assumed that the maintenance is the same for both machines. In talking with other companies who use these machines, these machines are capable of producing products for 5 years before major breakdowns occur. Since this is a rough estimate, you can use straight line depreciation. Tax rate for this company is 40%. Assume a MARR of 15% and calculate the Pw of the after tax cash flow. Also, perform a sensitivity analysis on MARR with plus or minus 5%.Explanation / Answer
cash flow for cincinnati:
cash flow from kawa guchi
sensitivity analysis:
In case of cincinnati :
Present value of cash flow aT MARR = 15+ 5%=20%
.6944
sensitivity = LDR+[(present value at LDR-Initial investment)(HDR-LDR)/(Presentvalue at LDR- present value at HDR)]
= 15% +[(85475.66 -80000)(20-15%)]/(85475.66-75837.88)
= 15% +[273.783]/(9637.78)
= 15% +.0284
= 15.0284%
cash flow at 20% for kawa guchi
Snesitivity analysis: 15% +[(128928.01-120000)(20-15%)]/(128928.01-114105.03)
15% +[(8928.01*5%)]/(14822.98)
15% +446.40/14822.98
15% +.030
15.03%
1 2 3 4 5 Total Revenue [120% of previous year cash flow] 30000 36000 43200 51840 62208 Less: Maintainence cost 2000 7000 12000 17000 22000 Depreciation[80000/5] 16000 16000 16000 16000 16000 Total cost 18000 23000 28000 33000 38000 Earning before tax 12000 13000 15200 18840 24208 less:Tax @40% 4800 5200 6080 7536 9683.20 Earning after tax 7200 7800 9120 11304 14524.80 Add:Depreciation 16000 16000 16000 16000 16000 net cash flow 23200 23800 25120 27304 30524.80 Present value @15% .8696 .7561 .6575 .5718 .4972 present value of cash flows 20174.72 17995.18 16516.40 15612.43 15176.93 85475.66