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1) Emeco Holdings Limited (Emeco) is a company listed on the Australian Securities Exchange (ASX). Emeco is investigating a proposal to replace one of their outdated earth-moving excavators with a new CAT 390F excavator. The new excavator has a much larger carrying capacity, offers improved fuel economy and has lower maintenance costs compared to the existing excavator. However, the cost of a brand new CAT 390F is $2.8 million and Emecos accountant is concerned that the net profit of the new excavator wont generate a fast enough payback period. Therefore, the accountant has approached the Chief Financial Officer (CFO) to express concerns. The CFO carefully explains the many reasons that profitability is not a good measure of financial success, and stresses that the appropriate action is to conduct a rigorous cost-benefit analysis to determine if the new excavator can deliver on the outcomes desired by its shareholders (pg. 21, 2019 Annual Report) namely, wealth creation. 2) Last month, Emeco paid for a study by an earthworks consultant at a cost of $487,000 and the study concluded that the large and growing infrastructure market will generate sufficient demand for a larger excavator. Today, Emeco must decide if they will proceed with the investment in the new excavator, and the simultaneous sale of their existing excavator. 3) According to the Australian Taxation Office (ATO) the new excavator has a sixteen-year life for taxation purposes. 4) Road and Maritime Services (RMS) requires that all heavy vehicles (including excavators) have a Certificate of Roadworthiness that indicates that the excavator has been inspected and found to comply with the minimum standards set out in NSW vehicle licencing legislation. The compulsory certificate is required before Emeco commences operations with the new excavator. Certification requires Emeco to spend $200,000 on safety equipment. The certificate expires four years later at which time the excavator must be recertified and the safety equipment replaced at an estimated cost of $200,000. Recertification must occur every four years. The safety equipment has no value in the secondary market.

14) It costs $175,000 a year to operate Emecos Perth headquarters. With careful management Emeco believes they will not require any additional personnel in headquarters if they purchase the new excavator. In any case, the annual headquarters operating expense will increase by 3% p.a.

Question:

List the expense of the headquaters from years 1-10.

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