Robomatic Electronic Plc$.$ is planning to purchase an auto$-$insertion machine for $$35,000.$ The expected useful life of the machine is $7$ years with no terminal scrap value. The following savings in operating costs are estimated:

$\backslash$table$[[$Year$,$Amount $$],[1,13,000],[2,10,500],[3,9,500],[4,8,500],[5,7,500],[6,6,500],[7,5,500],[$Total$,61,000]]$

Assuming that the capital cost is $10\%$ and the effects of income tax are ignored.

a$)$ Prepare a cash flow table $($include the cumulated cash flow$)$ and calculate the net present value for the project. Use the following table outline for reference:

$(13$ marks$)$

$\backslash$table$[[$Year$,$Cash Flow CF $($$$),$Cumulated CF $$,$Discount Factor,Present Value $($PV$)],[,,,,]]$

b$)$ Calculate the payback period.

$(5$ marks$)$

c$)$ Calculate the accounting rate of return ARR based on the net initial investment. Assume that a straight$-$line depreciation is used.

$(5$ marks$)$

d$)$ Based on your calculations, explain if the planned investment is sound.

$(2$ marks$)$

Saturn Design Studio $($SDS$)$ is considering to purchase a new computer system, branded Solar II$.$ It includes a professional graphic design software and a high$-$quality printer which together are expected to expand its design business. The initial cost of Solar II is $$125,000$ and has an estimated $4-$year life. Its estimated re$-$sale $($scrap$)$ value after $4$ years is $$12,000.$

It is estimated that the future cash inflows generated by the computer system will be $$32,000$ each year for the next four years. Assuming that all payments and receipts take place at the beginning or the end of a year:

Page $1$ of $4$

a$)$ Calculate the NPV of the project at a cost of capital of $8\%.$ Use the following table outline for reference:

$(8$ marks$)$

$\backslash$table$[[$Year$,$Net Cash Flow NCF $($$$),$Discount Factor,Present Value $($PV$)],[,,,]]$

b$)$ Suppose that the price of Solar II has been reduced to $$105,000.$ Calculate the updated NPV of the project $($cost of capital remains unchanged$).$ Use the following table outline for reference:

$\backslash$table$[[$Year$,$Net Cash Flow NCF $($$$),$Discount Factor,Present Value $($PV$)],[,,,]]$

Based on the updated NPV value, should SDS purchase the computer system in this or the previous case?

$(8$ marks$)$

c$)$ Suppose that a new computer system branded Universe I$-$R will be launched in the near future with a cost of $$185,000.$ The computer system can be used for five years and will generate cash inflows of $$38,000$ per year for $5$ years. It is estimated that Universe I$-$R can be sold for $$28,000$ at the end of year $5.$

In this situation, calculate the NPV of the project $($the capital cost remains unchanged$).$ Use the following table outline for reference:

$(8$ marks$)$

$\backslash$table$[[$Year$,$Net Cash Flow NCF $($$$),$Discount Factor,Present Value $($PV$)],[,,,]]$

d$)$ Considering the previously obtained results, which computer system should SDS purchase: the discounted Solar II for $$105,000$ or the soon$-$to$-$be$-$released Universe I$-$R for $$185,000?$ Please provide a rationale for your recommendation.

$(1$ mark$)$

Cosmo Plant Engineering Co$.$ Limited is planning to purchase a machine for $$1,480,000$ which has an estimated life of $6$ years. It is estimated that the machine's operating and maintenance $($O&M$)$ costs amount to $$8,500$ and a part$-$time operator will be employed at a cost of $$66,000$ for the first year. From then onwards, O&M costs are expected to increase at $8\%$ annually due to inflation while the operator cost is expected to increase at a $10\%$ annually due salary increase agreed with the union.

Page $2$ of $4$

Cosmo Plant Engineering expects to generate profits by producing and selling $120,000$ units of Product X in the first $3$ years, $140,500$ in the $4$th & $5$th year and $100,000$ in the $6$th year. The selling price and raw material cost for each product are $$15\mathrm{.}50$ and $$3\mathrm{.}60$ respectively. The machine has a scrap value of $$120,000$ at the end of the $6$ th year. Assuming that all payments and receipts take place at the beginning or the end of a year:

a$)$ Prepare a table for the net cash flow of the project. Use the following table outline for reference:

$\backslash$table$[[\backslash$table$[[$Time$],[($years$)]],,0,1,2,3,4,5,6$