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How do you come up with a cash flows statemement?

This is my last problem in this set and I am confused about what to use NPV / IRR?

How do you come up with a cash flows statemement - like the one attached for this particular problem?

I am very confused and hope that you can help.

** See ATTACHED file(s) for complete details **

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** See ATTACHED file(s) for complete details and SOLUTION **

Question 3: Stamping Press Replacement:
Only one can be accepted

Press 1: Lasts 5 yrs
Cost = $65,000 installed.
Annual Savings = $28,000
Salvage Value (end of 5 yrs) = $5,000

Press 2: Lasts 10 yrs
Cost = $90,000 installed.
Annual Savings = $28,000
Salvage Value (end of 10 yrs) = $5,000

*Same for both presses:
1. Labor and Materials = 65% of sales
2. Admin costs = 5% of sales
3. **Depreciation = 200% decline method

**Presses are considered 7 year property.
4. 15% hurdle rate
5. Salvage proceeds in excess of salvage value at the time of salvage were taxed at income tax rates.
6. ...

Solution Summary

Here is just a sample of what you'll find in this solution:

"It is very important that the Annual Savings = $28,000 are treated as cut in cost, rather than increase in revenue. Otherwise, we have to adjust for the increase in cost and expenses along with the sales, which might even worsen the projects' status."

$2.19