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PART C: (10 marks) Required Calculate the Net Present Value and Internal Rate of Return relative to the purchase of a new widget making machine. • Machinecost $3,400,000 • Useful life: 7 years • For tax purposes a 30 per cent reducing balance depreciation would be used. • Maintenance cost per annum: $75,000. • Maintenance technician salary per annum: $125,000 • Operator’s salary: $90,000, plus 35 per cent on-costs. • Restructuring cost (First year only): $180,000. • Employee training costs are projected as follows: First Year$35,000 Second Year$25,000 Third Year$10,000 • Increase in working capital required: $60,000. • Salvage value: $75,000. • Manufacturing cost savings per annum: $1,200,000. • Sale of now obsolete equipment over the next two years. o Company cost of capital: 10% o Tax rate: 30%.
