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NPV of Purchasing Delta Calculation of Tax 0 1

The document calculates the net present value of purchasing a new Delta machine to replace an old MATRIX machine. It estimates cash flows over 5 years from repair, maintenance, and operating cost savings, as well as the initial costs of purchasing the new machine and selling the old one. By discounting the cash flows, it determines that the net present value of purchasing the new Delta is $3,387.

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77 views

NPV of Purchasing Delta Calculation of Tax 0 1

The document calculates the net present value of purchasing a new Delta machine to replace an old MATRIX machine. It estimates cash flows over 5 years from repair, maintenance, and operating cost savings, as well as the initial costs of purchasing the new machine and selling the old one. By discounting the cash flows, it determines that the net present value of purchasing the new Delta is $3,387.

Uploaded by

ASAD ULLAH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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NPV of Purchasing Delta

Calculation of Tax 0 1
Repair costs saved (old) 28,000
Maintenance saved (old) 7,000
Major service saved (old)
Labour saving (new) 5250
Electricity saving (new) 4725
Maintenance (new) -1,000
Depreciation foregone (old) 6,000
Depreciation (new) -14,000
Profit/loss on sale (new)
Taxable income 28,000 7,975
Tax payable (saving) 8,400 2392.5

Cash Flows
Sale of MATRIX 35,000
Cost of Delta -140,000
Scrap foregone (old)
Repair costs saved (old) 28,000
Maintenance saved (old) 7,000
Major service saved (old)
Selling price (new)
Labour saving (new) 5,250
Electricity saving (new) 4,725
Maintenance (new) -1,000
LESS TAX -8,400 -2,393
CASH FLOWS -85,400 13,583
Discount factors at cost of capital 1 0.892857143
Discounted cash flows -85400 $12,127
Net Present Value $3,387
2 3 4 5

7,000 7,000 7,000 7,000


4,000
5500 5750 6000 6250
4800 4875 4950 5025
-2,000 -3,000 -4,000 -5,000
6,000 6,000 6,000 6,000
-14,000 -14,000 -14,000 -14,000
10,000
7,300 10,625 5,950 15,275
2190 3187.5 1785 4582.5

-5,000

7,000 7,000 7,000 7,000


4,000
80,000
5,500 5,750 6,000 6,250
4,800 4,875 4,950 5,025
-2,000 -3,000 -4,000 -5,000
-2,190 -3,188 -1,785 -4,583
13,110 15,438 12,165 83,693
0.797193878 0.7117802 0.6355181 0.5674268557186
$10,451 $10,988 $7,731 $47,489

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