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
4
Relevant
cash
flows
Present-value
discount
factors at 14%
Total
present
value
1 Initial investment in CIM today
2a Current disposal price of old production line
2b Current recovery of working capital (€6 − €2)
3a Recurring operating cash savings €4 each year for 5 years
3b Recurring cash flows from additional revenues of
€3 each year for 5 years
4a Higher terminal disposal price of machines
(€20 − €4) in year 5
4b
Reduced recovery of working capital (€2 − €6) in year 5 Net present value of CIM investment
€(45)
5 4
4 3
16
(4)
1.000 1.000 1.000 3.433 3.433 0.519 0.519
€(45.000)
5.000 4.000 13.732 10.299 8.304
(2.076)
€(5.741) The use of too short a time horizon such as 5 years biases against the adoption of
CIM projects. Before finally deciding against CIM in this case, Manuel should consider other factors, including
a
Sensitivity to different estimates of recurring cash savings or revenue gains.
b
Accuracy of the costs of implementing and maintaining CIM.
c
Benefits of greater flexibility that results from CIM and the opportunity to train workers for the manufacturing environment of the future.
d
Potential obsolescence of the CIM equipment. Dinamica should consider how difficult the CIM equipment would be to modify if there is a major change in
CIM technology.
e
Alternative approaches to achieve the major benefits of CIM such as changes in processor implementation of just-in-time systems.
f
Strategic factors. CIM maybe the best approach to remain competitive against other low-cost producers in the future.


199
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