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Shrieves Casting Company is considering adding a new line to its product mix. The production line would be set up in a section of Shrieves's main plant. This section is currently being rented out to an outside party for $20.000 per year. The machinery's invoice price would be $250,000, another $15,000 in shipping charges would be required, and it would cost an additional $35,000 to install the equipment. The machinery has an economic life of 4 years and would be in Class 8 with a CCA rate of 20%. The machinery is expected to have a salvage value of $20,000 after 4 years of use. Furthermore, to handle the new line, the firm's net operating working capital would increase by $40,000. The new line would generate sales of 1,300 units per year for 4 years. The estimated selling price and cost per unit are: Selling price per unit: $190 Cost per unit: $110 The firm's tax rate is 30%, and its overall weighted average cost of capital is 12%. Calculate the following: (enter answers with commas but without dollar sign e g. 100,000 and not $100,000) Initial investment: Capital cost of the equipment Initial working capital requirement Annual after-tax cash inflows: Sales Cost of goods sold Before tax cash inflows After-tax cash inflows Present value of cash outflows Total present value of cash outflows Present value (P.V) of cash inflows P.V of annual after-tax cash inflows P.V of salvage value P.V of working capital recovered P.V of CCA tax shield Total P.V of cash inflows NPV and decision Net present value Should the project be undertaken (answer Yes or No Yes Shrieves Casting Company is considering adding a new line to its product mix. The production line would be set up in a section of Shrieves's main plant. This section is currently being rented out to an outside party for $20.000 per year. The machinery's invoice price would be $250,000, another $15,000 in shipping charges would be required, and it would cost an additional $35,000 to install the equipment. The machinery has an economic life of 4 years and would be in Class 8 with a CCA rate of 20%. The machinery is expected to have a salvage value of $20,000 after 4 years of use. Furthermore, to handle the new line, the firm's net operating working capital would increase by $40,000. The new line would generate sales of 1,300 units per year for 4 years. The estimated selling price and cost per unit are: Selling price per unit: $190 Cost per unit: $110 The firm's tax rate is 30%, and its overall weighted average cost of capital is 12%. Calculate the following: (enter answers with commas but without dollar sign e g. 100,000 and not $100,000) Initial investment: Capital cost of the equipment Initial working capital requirement Annual after-tax cash inflows: Sales Cost of goods sold Before tax cash inflows After-tax cash inflows Present value of cash outflows Total present value of cash outflows Present value (P.V) of cash inflows P.V of annual after-tax cash inflows P.V of salvage value P.V of working capital recovered P.V of CCA tax shield Total P.V of cash inflows NPV and decision Net present value Should the project be undertaken (answer Yes or No Yes

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