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Course project B - Annual cash flows over the life of...

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Annual cash flows over the life of equipment Year 0 1 2 3 4 5 Wages 72,000 72,000 72,000 72,000 72,000 Other benefits (18%) 12,960 12,960 12,960 12,960 12,960 Health benefits 7,500 7,500 7,500 7,500 7,500 Raw material 275,000 275,000 275,000 275,000 275,000 Other variable cost 55,000 55,000 55,000 55,000 55,000 Depreciation 32,000 32,000 32,000 32,000 32,000 Disposal value (40,000) 454,460 454,460 454,460 454,460 414,460 Less: cost of purchasing can 495,000 495,000 495,000 495,000 495,000 Cost Savings of producing cans 40,540 40,540 40,540 40,540 80,540 Tax on savings (35%) 14,189 14,189 14,189 14,189 28,189 After tax savings 26,351 26,351 26,351 26,351 52,351 Add: Depreciation 32,000 32,000 32,000 32,000 32,000 Cash flows 58,351.00 58,351.00 58,351.00 58,351.00 84,351.00 Equipment cost (200,000) Training cost (15,000) Annual incremental cash flows (215,000) 58,351 58,351 58,351 58,351 84,351 Payback Period Year Cash flow Cumulative Balance Period (months) Initial outflow 0 (215,000)
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