correction

# correction - challenger is 3,000 YTL per year The analysis...

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Suppose you purchased a machine for 100,000 YTL 5 years ago. Its useful life is 10 years. Straight line depreciation is used for this machine for 10 years with a final book value of 0 YTL. The current market value for this machine is 55,000 YTL. This machine (defender) is labor intensive and 5 workers have to be available for the machine to work properly. Hourly wage for the workers is 10 YTL. Every day the machine works for one shift of 8 hours and there are 250 working days per year. The maintenance cost for the next year is 10,000 YTL and it increases by 1,000 YTL every year. (So in the final year (year 5) it is 14,000 YTL) It is possible to replace this machine with a semiautomatic machine for an initial investment of 60,000 YTL with a useful life of 5 years. Again straight line depreciation is used with a final book value (salvage value) of 10,000 YTL. Its final market value is 5,000 YTL. The maintenance cost for the
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Unformatted text preview: challenger is 3,000 YTL per year. The analysis period is 5 years. The new machine will also work for 8 hrs per day and 250 days per year. The hourly wage for the workers of the new machine is 12 YTL. What is the maximum number of required workers that will justify purchasing the new machine? (Effective tax rate = 40%, after tax MARR=10%) End of year 0 cash flow for the existing asset. This is for the case of keeping the existing asset. EOY BTCF Depreciation TI Tax ATCF-55000 --------------5000 2000 53000 (If we sold the existing asset now, we would have to pay tax for a gain of 5000 since MV=55000 and BV=50000, in the amount of 5000*0.4=2000. When we keep the existing asset, we do not have to pay this 2000 so it appears as a positive cash flow and increases the ATCF)...
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## This note was uploaded on 03/16/2012 for the course FENS 101 taught by Professor Selçukerdem during the Fall '12 term at Sabancı University.

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