Wonder Works Pte Ltd (WW) produces ceramic hair curlers to sell to department stores. The...
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Wonder Works Pte Ltd WW produces ceramic hair curlers to sell to department stores. The production equipment costs WW $ four years ago. Currently, the net book value stands at $ An improved version of the equipment is available now for $ The new machine has a useful life of five years. The disposal value at that point in time is estimated to be $ The new machine is expected to increase unit sales by curlers per annum. The estimated unit selling price is $ for the first year. The following table provides the unit costs for the first year: Direct labour, hours at $ per hour : $ Direct materials :$ Fixed costs including depreciation :$ Total : $ Required: a Derive the yearly net cash flows for the project. b Make a reasoned recommendation as to whether WW should proceed to purchase the new machine. c Conduct sensitivity analysis on the cost of capital to achieve a net present value of $ Utilize the IRR approach with the r trial values of and
Wonder Works Pte Ltd WW produces ceramic hair curlers to sell to department stores. The production equipment costs WW $ four years ago. Currently, the net book value stands at $ An improved version of the equipment is available now for $ The new machine has a useful life of five years. The disposal value at that point in time is estimated to be $
The new machine is expected to increase unit sales by curlers per annum. The estimated unit selling price is $ for the first year.
The following table provides the unit costs for the first year:
Direct labour, hours at $ per hour : $
Direct materials :$
Fixed costs including depreciation :$
Total : $
Required:
a Derive the yearly net cash flows for the project.
b Make a reasoned recommendation as to whether WW should proceed to purchase the new machine.
c Conduct sensitivity analysis on the cost of capital to achieve a net present value of $ Utilize the IRR approach with the r trial values of and
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