Hightec Toy Manufacturing Company Limited is planning to purchase an injection machine for $3,000,000. The machine...

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Hightec Toy Manufacturing Company Limited is planning to purchase an injection machine for $3,000,000. The machine has an estimated life of 4 years. It is estimated that the machine's maintenance expenses are around $10,500 per year and an operator will be employed at a wage of $160,000 per year to operate the machine. Hightec expects to generate income by producing 200,000 Item X in the first year, 205,000 in the second year, 205,000 in third year and 210,000 in the forth year. The selling price and raw material cost for each product is $10 and $4 respectively. The machine has a scrap value of $300,000 at the end of the 4th year. Suppose that the maintenance expenses remain no change for the 4 years. However, there is an annual rise of 3% for the operator's wage starting from the second year. (Assuming all payments and receipts occur at the beginning or the end of a year.) Prepare a table for the cash flow of the project. (16 marks) а. b. Calculate the NPV of the project cost of capital at 6%. (8 marks) Based on your calculation, suggest if this is a good investment. (1 mark) c. Hightec Toy Manufacturing Company Limited is planning to purchase an injection machine for $3,000,000. The machine has an estimated life of 4 years. It is estimated that the machine's maintenance expenses are around $10,500 per year and an operator will be employed at a wage of $160,000 per year to operate the machine. Hightec expects to generate income by producing 200,000 Item X in the first year, 205,000 in the second year, 205,000 in third year and 210,000 in the forth year. The selling price and raw material cost for each product is $10 and $4 respectively. The machine has a scrap value of $300,000 at the end of the 4th year. Suppose that the maintenance expenses remain no change for the 4 years. However, there is an annual rise of 3% for the operator's wage starting from the second year. (Assuming all payments and receipts occur at the beginning or the end of a year.) Prepare a table for the cash flow of the project. (16 marks) а. b. Calculate the NPV of the project cost of capital at 6%. (8 marks) Based on your calculation, suggest if this is a good investment. (1 mark) c.

Answer rating: 100% (QA)

First year Cash flow Sales 200000 Selling price 10 Cash from Sales 102000002000000 Expenses Raw material 4 per unit Total raw material cost 2000004800... View the full answer