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Financial Assignment

Autor:   •  December 17, 2015  •  Dissertation  •  1,654 Words (7 Pages)  •  831 Views

Page 1 of 7

 Industry

Year 1

Year 2

Year3

Weak(probability 50%)

3,000 units

4,000 units

3,000 units

Strong(probability 50%)

5,000 units

6,000 units

7,000 units

  1. If new machinery was to introduce to be used.

 Expected units in year 1= ( 3,000* 0.5) +(5,000*0.5)=4,000 units

 Expected units in year 2= ( 4,000* 0.5) +(6,000*0.5)=5,000 units

 Expected units in year 3= ( 3,000* 0.5) +(7,000*0.5)=5,000 units

The new machinery will reduce the labour hours required to produce a turbine from 5 hours to 2 hours, so for per unit they can save 3 labour hour.

Total labour hours saved for each year:

Year 1= 4,000 units * 3 labour hours/ units= 12,000 hours

Year 2= 5,000 units * 3 labour hours/ units= 15,000 hours

Year 3= 5,000 units * 3 labour hours/ units= 15,000 hours

Total annual cost saving for each year:

 Year 1= 12,000 hours*$ 7=$ 84,000

 Year 2= 15,000 hours*$ 8=$ 120,000

 Year 3= 15,000 hours*$ 9=$ 135,000

Year 1

Year 2

Year 3

Production volumes(units)

4,000

5,000

5,000

Labour hours saved per unit

3

3

3

Employees hourly rate($/hours)

7

8

9

Total  annual cost saving ($)

84,000

120,000

135,000

cost of capital

Year 1

Year 2

Year 3

Net Book value

$200,000

$150,000

$112,500

$84,375

capital allowance(25%)

$50,000

$37,500

$28,125

b)

...

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