Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed



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solutions-manual-to-bhimani-et-al-management-and-cost-accounting-pearson-2012-1
Solution Exhibit 13.20
Net present-value analysis of purchasing new automatic machine.







Total
present
value
Present-
value
discount
factor
at 18%


Sketch of relevant cash flows

End of year

0 1
2 3
4 A. Automatic machine Net initial investment
£(44,000)
←−
1.000
←−
£(44,000) Current disposal price of old equipment
5,000
←−−
1.000
←−− Recurring operating cash costs
(71,285)
←−−
2.690
←−−−−−−−−
£(26,500) £(26,500)
£(26,500)
£(26,500
) Present value of net cash outflows
£(110,285) B. Moulding machine Terminal disposal price of old equipment
4 years hence Recurring operating cash costs
(121,050
)
←−−
2.690
←−−−−−−−−
£(45,000) £(45,000) £(45,000) Present value of net cash outflows Difference in favour of replacement AB An alternative analysis of cash inflows and outflows (in thousands) is

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