Question

The Fresno Finial Fabricating Works is considering automating its existing finial casting and assembly department. The plant manager, John, has accumulated the following information for you: The automation proposal would result in reduced labor costs of Rs.150, 000 per year. The cost of defects is expected to remain at Rs.5, 000 even if the new automation proposal is accepted. New equipment costing Rs.500, 000 would need to be purchased. For financial reporting purposes, the equipment will be depreciated on a straight-line basis over its useful four-year life. The estimated final salvage value of the new equipment is Rs.50, 000. Annual maintenance costs will increase from Rs.2, 000 to Rs.8, 000 if the new equipment is purchased. The company is subject to a marginal tax rate of 30 percent.
What are the relevant incremental cash inflows over the proposals useful life, and what is the incremental cash outflow at time 0?​

Answer 1

Answer:

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