MGT 5 Lecture Notes - Lecture 17: Negative Number, Net Present Value
10 Dec 2018
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Document Summary
When you need to replace the motor/do a major renovation in order to have the machine work accordingly. The overhaul in this problem is for the new machine. ,000 needs to be disbursed in yr 4. Since this is a calculation of cost (money leaving the company) any money coming into the company is treated as a negative number. On the final, partial value will be given if you can correctly calculate the cost. Not the same every year because of the overhaul in year 4. Set the overhaul aside and treat the full 9 years as the same and come back to account for year 4. * depr = cost/life = 855,000/9 = 95,000. Depreciation doesn"t go into the cash column because it is a non cash expense. The annuity calculated here ignores the overhaul in yr 4 and the nbv. There is also partial credit given for this section on the final.
